Moody’s lowers Unit Corp.

Moody’s Investors Service said it downgraded Unit Corp.’s probability of default rating to Ca-PD from B3-PD, corporate family rating to Caa1 from B3, and senior subordinated notes to Caa2 from Caa1. the speculative grade liquidity rating remained unchanged at SGL-4.

These downgrades follow Unit’s announcement it’s offering to exchange its 6 5/8% senior subordinated notes due 2021 for newly issued 10% senior secured second-lien notes and 7% senior secured third-lien notes. The offer is conditioned on Unit getting an amendment from its secured first-lien revolver lenders, or a refinancing or replacement of the revolver. The offer expires Dec. 13.

Moody’s views the offer as a distressed-debt exchange.

“The proposed exchange, if successful, will result in a significant loss of principal as well as an extended maturity for existing noteholders in relation to the original note agreement. The Caa1 CFR and Caa2 rating on the 2021 notes reflect Moody’s view on expected recovery, which is likely to be in the 80%-90% range. Prior to the exchange offer, Unit was contending with depressed commodity prices, looming maturities in a challenged refinancing environment and declining cash flow,” said Moody’s in a press release.

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