OREANDA-NEWS. S&P Global Ratings today lowered its long-term corporate credit rating on TX-based oilfield services company Basic Energy Services Inc. to 'CC' from 'CCC-'. At the same time, we lowered the issue rating on Basic's senior secured term loan to 'CCC' from 'CCC+'. The recovery rating remains '1', indicating our expectation of very high (90%-100%) recovery in the event of a payment default. We also lowered the issue ratings on Basic's senior unsecured notes to 'CC' from 'CCC-'. The recovery rating on this debt is '4', indicating our expectation of average (30%-50%; lower end of range) recovery for creditors in the event of a payment default.

"The downgrade follows Basic's announcement on Aug. 15, 2016, that it has decided to defer the coupon payment on its senior unsecured notes maturing 2019," said S&P Global Ratings credit analyst Christine Besset. "The payment due date was Aug. 15, 2016, and Basic is using the 30-day grace period provided in the notes' indenture because the company is in the process of restructuring its balance sheet," she added.

We believe that the company is likely to announce a capital restructuring or make the payment within the 30-day grace period.

The negative outlook on Basic Energy Services Inc. reflects our view that the company will likely announce a distressed exchange within the next couple of months.

We could consider raising the rating if we expect the company will be able and willing to pay all debt obligations in full and on time.