August 14, 2012 / 7:56 PM / 5 years ago

TEXT-S&P cuts GMX Resources rating to 'CC'

     -- U.S.-based oil and gas exploration and production company GMX 
Resources Inc. has launched an exchange offer for the remainder of its
5% convertible senior notes due 2013 and a portion of its 4.5% convertible
senior notes due 2015.
     -- We have lowered the corporate credit rating to 'CC' to reflect the 
likelihood of a selective default.
     -- The outlook is negative.

Rating Action
On Aug. 14, 2012, Standard & Poor's Ratings Services lowered its corporate 
credit rating on Oklahoma City, Okla.-based GMX Resources Inc. to 'CC' from 
'CCC+'. The 'CCC+' rating on the company's $283.5 million senior secured 
notes, remains unchanged. The outlook is negative.

The downgrade to 'CC' reflects the potential for a selective default on GMX's 
4.5% senior convertible notes due 2015 ($86.3 million outstanding as of June 
30, 2012), due to certain aspects of GMX's exchange offer that would 
constitute a distressed exchange under Standard & Poor's criteria. As part of 
the exchange offer for its 2013 and 2015 convertible notes (see below), 
holders of the 2015 notes have the right to exchange $1,000 principle of 
existing notes for $700 principle of new senior secured second-priority notes 
due 2018. We view this as a distressed exchange. Holders of the existing 2015 
notes, regardless of when purchased, would receive significantly less than the 
original face value that was promised. 

The exchange offer allows for the following:

     -- To exchange $1,000 principle of its 5.00% convertible notes due 2013 
($52 million outstanding) for $1,000 principle amount of new 9% senior secured 
second-priority notes due 2018 plus 288 shares of common stock,
     -- To exchange $1,000 principle of its 4.50% convertible notes due 2015 
for $700 principle amount of new 9% senior secured second-priority notes due 
     -- The amount of 2015 convertible notes potentially exchanged is limited 
by a $60 million limit on the second-priority notes that can be issued and the 
amount of 2013 notes successfully exchanged, and
     -- If all $52 million outstanding 2013 convertible notes are exchanged, 
$8 million of second-priority notes would remain available for holders of the 
2015 convertible notes. 

The ratings on GMX's $283.5 million senior secured notes due 2017 are 
unchanged as they are not part of the exchange offer.

The negative outlook reflects the likelihood that the corporate credit rating 
will be lowered to 'SD' following the completion of the exchange offer. 
Subsequently, we will review our ratings on GMX based on its new capital 
structure and outlook for liquidity in 2013. 

Related Criteria And Research
     -- General Criteria: Rating Implications Of Exchange Offers And Similar 
Restructurings, Update, May 12, 2009 
     -- General Criteria: Rating Implications Of Exchange Offers And Similar 
Restructurings, Jan. 28, 2009

Ratings List
Downgraded; Outlook Negative
                                        To                 From
GMX Resources Inc.
 Corporate Credit Rating                CC/Negative/--     CCC+/Developing/--

Ratings Affirmed

GMX Resources Inc.
 Senior Secured                         CCC+               
  Recovery Rating                       4

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below