OREANDA-NEWS. S&P Global Ratings today raised its corporate credit rating on U. S.-based oil and gas exploration and production company Bonanza Creek Energy Inc. to 'CC' from 'D'. The rating outlook is negative.

At the same time, we raised our issue-level rating on the company's senior unsecured debt to 'CC' from 'D'. The recovery rating is unchanged at '6', indicating our expectation for negligible (0%-10%) recovery of principal in the event of a payment default.

"The upgrade follows the company's announcement that it has made the interest payment on its unsecured notes due 2023 within the 30 day grace period," said S&P Global Ratings' credit analyst Daniel Krauss, CFA. The ratings reflect Bonanza Creek's heightened default risk in the next few months, given its upcoming semiannual $16.9 million interest payment on the $500 million unsecured notes. The ratings also reflect our view that, despite having sufficient cash balances to make this payment, Bonanza Creek may elect not to make the next interest payment as it did in August with the $300 million unsecured notes. The company is also overdrawn on its revolving credit facility by $73 million as of June 30, 2016, and it is subject to roughly $15 million in monthly deficiency payments through November. We believe the borrowing base will be further reduced at the upcoming fall redetermination.

"The negative rating outlook reflects the potential the we could lower our corporate credit rating on Bonanza Creek to 'D' within the next few months if the company doesn't makes its upcoming interest or deficiency payments in a timely manner," said Mr. Krauss. "We could also lower the rating if the company completes a debt exchange, which we view as distressed."

We could raise the rating if the company meets its upcoming obligations, and we no longer viewed a default as a virtual certainty within the next 12 months.