Moody's downgrades Dixie

Moody's Investors Service said it considers the expiration of Dixie Electric, LLC's grace period for the missed September interest payment of the first-lien term loan due 2020 as a limited default.

The probability of default rating also was downgraded to C-PD/LD (limited default) from Ca-PD.

The Ca corporate family rating also was affirmed, along with the Ca ratings on the bank credit facilities.

The outlook remains negative.

While the five-day grace period on the first-lien term loan due 2020 expired in early September, Dixie and certain lenders entered into a 30-day forbearance agreement, which was subsequently extended by two weeks, Moody's said.

The ratings reflect the company's heightened debt-restructuring risk, the agency said.

Moody's said it expects that activity levels and earnings will gradually recover in 2018 through 2019, but may not be able to sustainably support debt service and liquidity needs.

The credit profile also reflects Dixie's modest scale, lack of geographic and end-market diversification, the agency said, and its reliance on the highly cyclical upstream oil and gas sector.

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