Fitch rates Civitas notes BB-

Fitch Ratings said it gave BB-/RR4 ratings to Civitas Resources, Inc.’s planned sale of $1.35 billion of 8% senior unsecured notes due 2028 and placed all its ratings on rating watch positive.

The ratings are the same as Fitch’s ratings on Civitas’ $400 million of 5% senior unsecured notes due 2026.

The positive watch follows the announcement that Civitas agreed to buy Hibernia Resources III LLC and Tap Rock Resources LLC, excluding the Olympus area, for a combined $4.7 billion, the agency said.

“The transaction will materially increase production size and proved reserves base, will be accretive to post-dividend FCF and will diversify production outside of the DJ Basin. The deal under the proposed terms and funding mix will significantly increase gross debt and leverage; however, the company will maintain clear headroom under Fitch's leverage sensitivity with leverage projected to remain at or below 1.5x through the forecast,” Fitch said in a press release.

Fitch said it plans to resolve the positive watch at the close of the transactions which is expected to occur in early August and result in at least a one-notch upgrade to the issuer rating, revolver, and unsecured ratings.

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