Research Update: AFE S.A. Downgraded To 'CC' From 'CCC' On Proposed Debt Restructuring; Outlook Negative

On Dec. 22, 2023, AFE S.A. proposed a restructuring of its outstanding debt, including the senior secured notes (SSNs), and reached an agreement on acquisition by AGG Capital Management Ltd. We view AFE's proposal to extend maturity of its SSNs by six years to July 15, 2030, as tantamount to default once executed, because we think that the proposed restructuring is distressed, and noteholders would receive less than promised in the original SSNs' documentation. Therefore, we lowered our long-term issuer credit rating on AFE and our issue level rating on its SSNs to 'CC' from 'CCC'. The negative outlook indicates that we will lower our rating on the company to 'SD' (selective default) and on its SSNs to 'D' (default),

...- On Dec. 22, 2023, AFE S.A. proposed a restructuring of its outstanding debt, including the senior secured notes (SSNs), and reached an agreement on acquisition by AGG Capital Management Ltd. - We view AFE's proposal to extend maturity of its SSNs by six years to July 15, 2030, as tantamount to default once executed, because we think that the proposed restructuring is distressed, and noteholders would receive less than promised in the original SSNs' documentation. - Therefore, we lowered our long-term issuer credit rating on AFE and our issue level rating on its SSNs to '##' from '###'. - The negative outlook indicates that we will lower our rating on the company to '##' (selective default) and on its SSNs to 'D' (default), upon completion and implementation of the proposed transaction. - We will likely raise the ratings on AFE and the SSNs to the '###+' level shortly after we record the default, based on a material improvement of its liquidity and debt maturity profile....

Research Update