Fitch downgrades Unit

Fitch Ratings said it downgraded the long-term issuer default rating of Unit Corp. to CC from CCC+, the senior secured revolver to CCC+/RR1 from B+/RR1 and the senior subordinated notes to CC/RR4 from CCC+/RR4. Fitch maintained the rating watch negative on the IDR and instrument ratings.

Fitch’s downgrade and watch reflect the company’s heightened refinancing and liquidity risks associated with a pro-longed operational deterioration since its bond exchange announcement. On Monday, Unit said it was extending the expiration date of its proposed debt exchange offer, which now expires Jan. 31. Since the announcement of the exchange, Unit extended the early tender date twice and extended the expiration date for a second time, signaling uncertainty.

Fitch said it believes the CC rating adequately reflects Unit’s business and financial risks regarding the proposed bond exchange. Successful execution of the exchange would be classified as a distressed-debt exchange and would result in a downgrade to RD to record the event of default.

If the exchange offer is unsuccessful, an event of default in the near-term is likely, Fitch said.

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