Quicksilver Rating Reduced by Moody’s After Adviser HiredKatherine Chiglinsky
Quicksilver Resources Inc.’s credit rating was cut two levels by Moody’s Investors Service after the gas producer hired an adviser to assist in formulating a strategic plan that may include asset sales.
Quicksilver’s rating was reduced to Caa3 from Caa1, affecting about $1.8 billion of debt, Moody’s analysts led by Peter Speer wrote today in a report. That grade represents “very high credit risk.”
“The hiring of a Strategic Alternatives Officer combined with the ongoing delay in reaching an agreement for potential asset sales increases the possibility that the company may pursue a debt restructuring that we would view as a distressed exchange,” Speer wrote in the note.
Stephen Lindsey, a spokesman at Quicksilver, didn’t immediately return a telephone call seeking comment.
Quicksilver’s $350 million of 7.125 percent notes due April 2016 fell 0.3 cent to 43.8 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s up from an all-time low of 40 cents reached Sept. 23.
The company lost $36.1 million in the three months ended June 30, its third straight quarterly loss, according to data compiled by Bloomberg. It reported $41 million of interest expense in that time period and $22.7 million of operating income, the data show.
The company’s cash margins “are insufficient to cover its heavy interest costs, high debt levels and near-term refinancing risk that raises concerns over the sustainability of the company’s capital structure,” the Moody’s analysts wrote in the report.