S&P upgrades RGL Reservoir

S&P said it raised the long-term corporate credit rating on RGL Reservoir Management Inc. to CCC+ from SD (selective default).

The agency also said it raised the rating on RGL's first-lien term loan, which also includes a $45 million revolver, to CCC from D (default).

The recovery rating on the debt remains at 5, indicating 10% to 30% expected default recovery.

The outlook is negative.

The upgrade follows news that RGL's amendments to its senior secured debt facilities materially changed the amount outstanding and the facility's terms, S&P said.

As part of the amendments, the first-lien revolver repayment term was extended to 2021 from 2019, amortization payments were added and interest rates were increased, except for $5.6 million of the revolver outstanding, the agency explained.

The total revolver size was reduced to $45 million and the C$140 million second-lien debt was exchanged for C$55 million first-lien debt in addition to common shares and warrants, S&P said.

The transaction is considered a distressed exchange because debtholders received less than what promised on the original debt terms, the agency said.

The agency said it continues to view the company’s financial leverage as unsustainably high in 2016 and 2017.

Nevertheless, with about C$81 million of cash at March 31, 2016, S&P said it believes RGL should be able to meet its financial commitments and a default scenario is not envisioned over the next 12 months.

© 2015 Prospect News.
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