Moody’s lowers Vanguard Natural Resources

Moody’s Investors Service said it downgraded Vanguard Natural Resources, LLC’s corporate family rating to Caa3 from B3, probability of default rating to Caa3-PD from B3-PD and the ratings on its senior unsecured notes to Ca from Caa2.

The speculative grade liquidity rating remains at SGL-4.

This concludes a review that began in January.

The outlook is negative.

The downgrades reflect an expectation that the company’s credit metrics will deteriorate in 2017 and that it will have weak liquidity throughout 2016, Moody’s said, despite generating positive free cash flow.

The company benefits from having a significant portion of its production hedged to produce positive free cash flow in 2016 and 2017, the agency said. But free cash flow will not be sufficient to meaningfully reduce leverage, Moody’s added.

The SGL-4 speculative grade liquidity rating reflects Vanguard’s weak liquidity, the agency said.

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