Moody's cuts Encino loan

Moody's Investors Service said it downgraded Encino Acquisition Partners Holdings, LLC's senior secured second-lien term loan rating to B3 from B2 and changed the outlook to negative from stable.

Moody's also affirmed Encino's B1 corporate family rating and its B1-PD probability of default rating.

“Encino's negative outlook reflects the significant credit weakening of pure-play natural gas producers including Encino, in light of the anemic natural gas price outlook. Despite Encino's low debt burden, good commodity hedge book and a supportive sponsor, its credit profile will remain weak until natural gas fundamentals improve. Deterioration in the valuation of Encino's reserves reduced the asset coverage for the second lien term loan which is subordinated to a substantial first lien credit facility,” said Sreedhar Kona, a Moody's senior analyst, in a press release.

“An absence of near-term refinancing needs and the company's adequate liquidity contribute to the affirmation of CFR,” Kona said.

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