Moody's downgrades Halcon

Moody's Investors Service said it downgraded Halcon Resources Corp.'s corporate family rating to Caa2 from B3, probability of default rating to Caa2-PD from B3-PD and the rating on its senior unsecured notes to Caa3 (LGD 4) from Caa1 (LGD 4).

Moody's also said it affirmed Halcon's SGL-4 speculative grade liquidity rating.

The outlook remains negative.

The downgrades reflect the elevated risk of a debt restructuring or distressed exchange while the company evaluates strategic and financial alternatives, the agency said.

The ratings are challenged by the company's small scale, Moody's said.

Halcon previously reduced its significant debt and interest expense burden through the bankruptcy process in 2016 from previously unsustainable levels, the agency noted.

Its operations are now entirely focused in the Delaware Basin, where the company has expanded its inventory of economic drilling locations, Moody's said.

The negative outlook reflects Halcon's weak liquidity and significant capital needs to grow its small asset base, the agency said.

Moody's lowers Tapstone Energy

Moody's Investors Service said it downgraded Tapstone Energy, LLC's corporate family rating to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD.

Moody's also said it affirmed the rating on Tapstone's senior unsecured notes at Caa2.

The outlook was changed to negative from stable.

The downgrades reflect weak liquidity and reduced financial flexibility, which could constrain the pace of development, limiting production growth, Moody's said.

Tapstone's high cost of debt and bonds meaningfully below par constrain the company's ability to refinance, which raises risk of a distressed-debt exchange that could lead to principal losses for bondholders and be deemed a default by Moody's, the agency explained.

The negative outlook reflects heightened risk of further erosion of liquidity and execution risks to growth as the company repositions its asset base, Moody's said.

The ratings reflect the small scale, basin concentration, constraints on financial flexibility and refinancing risks, the agency said.

Moody's upgrades DI Purchaser, rates loans Caa1, Caa2

Moody's Investors Service said it upgraded DI Purchaser, Inc.'s corporate family rating to Caa1 from Caa3 and probability of default rating to Caa1-PD from Caa3-PD, along with senior secured first-lien term loan due 2021 to Caa1 (LGD 3) from Caa3 (LGD 4) and senior secured second-lien term loan due 2022 to Caa2 (LGD 5) from Ca (LGD 5).

The ratings on these instruments will be withdrawn following the successful completion of the proposed amendments.

Moody's also said it assigned a Caa1 (LGD 3) rating to the company's proposed amended senior secured first-lien term loan due in December 2023 and Caa2 (LGD 5) to the senior secured second-lien term loan due in December 2024.

The outlook remains stable.

The upgrades reflect the company's extended debt maturities, improving fundamentals and declining leverage, the agency said.

As part of a bolt-on-acquisition, DI is expected to amend its credit facilities to push out maturities by two years, as well as conserve cash with a PIK feature on its second-lien term loan, Moody's said.

Pro forma for the transaction, the agency said it projects debt-to EBITDA to decline to 7.1x at year-end 2019, compared to 7.6x at year-end 2018.

This improvement is the result of higher earnings from the transaction, organic growth, cost-saving initiatives already put in place during 2017 and 2018 and the equity injection from DI's private equity owner, which limits the amount of debt that would have otherwise been added to complete the acquisition, Moody's said.

The stable outlook reflects an expectation that the company's liquidity will remain adequate and operating fundamentals will continue to improve, the agency said.

S&P upgrades H-Food

S&P said it raised the rating on H-Food Holdings LLC's senior secured first-lien debt by one notch to B from B-.

The agency also said it revised the recovery rating on the debt to 2 from 3.

The 2 recovery rating indicates 70% to 90% expected default recovery.

The upgrade was due to the company's senior secured first-lien debt balances, which are lower than previously anticipated, leading to improved recovery prospects.

The company's debt capital structure consists of a $225 million revolving credit facility due in 2023, $1.14 billion first-lien term loan due 2025, $515 million incremental first-lien term loan due 2025, $300 million second-lien term loan due 2026 and $350 million of 8½% senior notes due 2026.

The issuer of the revolver and term-loan is H-Food Holdings.

Hearthside Bidco BV is a co-borrower on the term loan, which supports the company's international operations, S&P said.

The guarantors of the facility are H-Food Holdings and all of its direct and indirect wholly owned material domestic and Dutch subsidiaries, the agency said.

The facility is secured by a first-priority lien on substantially all of the assets and stock of the borrowers and H-Food Holdings' domestic subsidiaries and Dutch subsidiaries, S&P said.

The second-lien term loan is secured on a secondary basis to the collateral mentioned above.

The notes are senior unsecured obligations and subordinated to the senior secured credit facilities, the agency said.

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