S&P: Energy XXI on watch

Standard & Poor's said it affirmed the B+ corporate credit rating on Energy XXI (Bermuda) Ltd., along with the B- rating on its convertible debt.

The agency also said it placed the ratings on subsidiary Energy XXI Gulf Coast Inc.'s debt on CreditWatch with negative implications, reflecting potentially less favorable recovery prospects for these noteholders given the increased debt that will be put in place to finance the transaction.

The outlook is stable.

Despite weaker credit measures attributed to higher debt levels used to fund an acquisition, the stable outlook reflects an expectation that Energy XXI will prudently manage its capital spending in fiscal 2015, enabling the company to generate positive cash flow and reduce debt levels, said Mark Salierno, an S&P analyst.

Salierno said in a press release that the agency estimates the company's FFO-to-debt will be in the low 20% range and that debt-to-EBITDA will be in the low 3x range by the end of fiscal 2015.

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