DBRS Downgrades Southern Pacific Resource’s Issuer and Security Ratings to D

DBRS Limited (DBRS) has today downgraded the ratings of Southern Pacific Resource Corp. (STP or the Company) as follows: (1) The Issuer Rating to D from C. (2) The Senior Secured Second Lien Notes (the Notes) to D from C (low). DBRS has also discontinued the recovery rating of the Notes. In accordance with DBRS policy, these rating actions follow STP’s announcement that it has obtained creditor protection under the Companies’ Creditors Arrangement Act (Canada) (the CCAA).

On December 12, 2013, DBRS downgraded STP’s Issuer Rating to CCC from B (low) and the Notes to CCC (low) from B (low). DBRS also changed the recovery rating of the Notes to RR5 from RR4 and placed all ratings Under Review with Negative Implications. These rating actions reflected the material change in the Company’s business risk profile following continued disappointing production results and the limited availability of liquidity to support operations.

On December 31, 2014, DBRS downgraded STP’s Issuer Rating to C from CCC and the Notes to C (low) from CCC (low). DBRS also changed the recovery rating of the Notes to RR6 from RR5. All ratings remained Under Review with Negative Rating Implications. These rating actions followed STP’s announcement that it would not make the cash interest payments of its Convertible Unsecured Subordinated Debentures (the Debentures). Under the terms of the Debentures, the Company has a 30-day cure period from the periodic interest payment date to make this cash payment before an event of default occurs. DBRS noted that the Company’s failure to satisfy the interest obligation prior to the exhaustion of the grace period was expected to result in a downgrade to D by DBRS.

On January 21, 2015, STP obtained creditor protection under the CCAA. As such, in accordance with DBRS policy, STP’s issuer and securities have today been downgraded to D by DBRS.

Notes:
All figures are in Canadian dollars unless otherwise noted.

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The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are DBRS Recovery Ratings for Non-Investment Grade Corporate Issuers and Rating Companies in the Oil and Gas Industry, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.