In another blow to the beleaguered energy lending business, Standard & Poor's reduced the ratings of Houston-based oil company KCS Energy Inc. on Tuesday.
The move came after KCS Energy said May 18 it had "substantial doubt" about its ability to continue as a going concern and had agreed with creditors to suspend the repayment schedule of its credit line until June 30.
S&P downgraded the company's overall credit rating from B-minus to CCC- plus. S&P said costs incurred recently by KCS Energy had put it in violation of covenants under its $175 million senior secured bank credit facilities.
That credit line was underwritten in January 1997 and restructured in 1998 by a bank group led by the Canadian Imperial Bank of Commerce, Bank One Corp., the former NationsBank Corp., and Comerica Inc.
Pricing was set at the London interbank offered rate plus 200 basis points. The loan was to mature in September 2000, according to Thomson Financial Securities Data.
KCS Energy is the latest example-if not the most glaring-of troubled loans to the oil and gas industry. A jumbo, $7 billion leveraged loan to Lyondell Chemical Co. was restructured last month by Donaldson, Lufkin & Jenrette and J.P. Morgan & Co. after the company suffered cash-flow problems.