S&P upgrades PE-backed SandRidge from default, expects restructuring

Two energy firms with current and former ties to Riverstone Holdings LLC drew one negative and one positive rating change from Standard & Poor’s Rating Services as debt issues loom in the space.

SandRidge Energy Inc drew an upgrade to CCC- from D after the oil-and-gas producer said it made a $21.7 million interest payment on March 15, within a 30-day interest-payment grace period.

The new rating means its debt remains vulnerable and dependent on favorable business conditions, according to S&P definitions. But it’s one notch higher than a D, which stands for default.

“The ‘CCC-‘ corporate credit rating reflects our view that SandRidge is likely to pursue a restructuring within the next six months,” Standard & Poor’s credit analyst Ben Tsocanos said in a prepared statement.

Riverstone and Carlyle Group each own about 8.9 million shares of SandRidge Energy, according to public filings. Spokespeople from both firms declined to comment.

In January, SandRidge Energy said it hired Kirkland & Ellis LLP as legal advisor and Houlihan Lokey Inc. as financial advisor, to help it weigh financial, transactional, and strategic alternatives.

Foresight Energy’s balance sheet weakens

Foresight Energy, a coal producer that Riverstone exited in 2015, failed to make a $23.6 million interest payment on senior notes on March 15.

The company’s auditors have issued a going-concern opinion, saying it’s “reasonably possible that Foresight would not be able to comply with its financial covenants in 2016,” S&P said.

S&P Ratings analyst Vania Dimova cut her view on the St. Louis-based company to D for default. It was previously rated CCC-.

Riverstone took Foresight Energy public in 2014 at $20 a share for total proceeds of $350 million. The stock now trades at $1.49 a share, with a market cap of $194 million.

In 2015, Riverstone sold its ownership interest in Foresight Reserves to companies controlled by billionaire Chris Cline of The Cline Group, an owner of coal companies. Around that time, Cline then sold a portion of his shares to coal magnate Bob Murray for $1.4 billion, according to a report.

As of February 29, Foresight held about $21.9 million cash on hand and about $50 million of interest payments due in the next six months on its debt outstanding.

In 2015, the company’s coal sales fell to $979.2 million from $1.1 billion in the prior year as prices dropped in the face of weak market conditions, the company said on March 15.

Action Item: Foresight Energy 2015 results, http://1.usa.gov/1pz1nas

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