Standard & Poor's Assigns Single-'B'-minus Rating to KCS Energy's Proposed Senior Subordinated Notes

Strategic Insights -

Standard & Poor's has assigned its single-'B'-minus rating to KCS Energy Inc.'s proposed offering of $125 million senior subordinated notes due 2008. The rating is placed on CreditWatch with positive implications, reflecting the start-up of KCS' new sour gas treatment plant in the Manderson Field, Wyoming. The company is expected to use the net proceeds from this issue to repay existing indebtedness under its bank credit facilities.

Key Takeaways:

  • KCS Energy's proposed offering of $125 million senior subordinated notes due 2008 has been assigned a single-'B'-minus rating by Standard & Poor's.
  • The rating is placed on CreditWatch with positive implications, reflecting the start-up of KCS' new sour gas treatment plant in the Manderson Field, Wyoming.
  • The company is expected to use the net proceeds from this issue to repay existing indebtedness under its bank credit facilities.
  • KCS' single-'B'-plus corporate credit rating and single-'B' senior unsecured debt rating remain on CreditWatch with positive implications.
  • The success of the sour gas treatment plant could result in a significant increase to KCS' proved reserves, potentially leading to a one-notch upgrade in the corporate credit rating.
  • The company is expected to reduce its emphasis on drilling within the contract area, shifting its focus to more competitive finding costs in the Rocky Mountains and Mid-Continent.

Statistics:

  • $125 million: The amount of senior subordinated notes due 2008 being proposed by KCS Energy.
  • Single-'B'-minus: The rating assigned by Standard & Poor's to KCS Energy's proposed senior subordinated notes.
  • 54: The number of wells drilled to date in the Manderson Field, which are expected to be completed, stimulated, or remediated.
  • Single-'B'-plus: The corporate credit rating of KCS Energy, which remains on CreditWatch with positive implications.
  • Single-'B': The senior unsecured debt rating of KCS Energy, which remains on CreditWatch with positive implications.
  • Single-'B'-minus: The subordinated debt rating of KCS Energy, which remains on CreditWatch with positive implications.
  • December 1996: The month when KCS Energy's above-market take-or-pay contract was terminated.
  • $37 million: The estimated annual production reduction if the sour gas treatment plant is not used. (Source: CreditWire, Standard & Poor's)

Sources:

  • Standard & Poor's CreditWire
  • SEC Filing by KCS Energy Inc. (amendment to the offering of convertible subordinated notes due 2004)