Moody’s gives California Resources B1

Moody’s Investors Service said it gave California Resources Corp. new ratings, including a B1 corporate family rating, a B1-PD probability of default rating and a B3 to its second-lien term loan. These are first time ratings following the company’s emergence from bankruptcy.

“CRC’s B1 CFR reflects current low oil prices that limit the company’s ability to generate free cash flow, the high cost of its production relative to oil prices, and the potential for lower production volumes in 2021, while the company limits its capital expenditures to internally generated cash flow,” Moody’s said in a press release.

The term loan’s B3 rating, two notches lower than the CFR, reflects the term loan’s more junior priority claim on assets than borrowings under the revolving credit facility. California Resources’ oil and gas assets secure the revolver and term loan, Moody’s said. The company also has a $540 million first-lien revolver and guarantees $300 million of senior secured notes, which are the obligations of EHP Holdco.

The outlook is stable, reflecting the expectation that CRC will weather the low and volatile oil & gas price environment and limit any decline in production volumes without needing significant debt financing, the agency said.

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