Moody's rates Gastar notes add-on Caa2

Moody's Investors Service said it assigned a Caa2 rating to Gastar Exploration USA, Inc.'s $125 million add-on senior note offering.

Proceeds from the notes, concurrent with a preferred stock offering of 2.14 million shares (roughly $53.5 million), will be used to finance its acquisition of assets in the Mid-Continent (West Edmond Hunton Lime Unit) for $187.5 million.

Gastar's other ratings are unchanged and the outlook remains positive.

Moody's said the Caa2 ratings on the proposed add-on notes reflects both their subordination to Gastar's senior secured revolving credit facility's potential priority claim to the company's assets and the guarantee by essentially all material domestic subsidiaries on a senior secured second-lien basis.

Primarily, the presence of a revolver (currently $50 million, but possible upsizing to $90-100 million range pro forma for the West Edmond Hunton acquisition) results in Gastar's secured notes being rated one notch below the Caa1 corporate family rating under Moody's Loss Given Default Methodology.

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