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Denver-based SM Energy Co. announced two offers of aggregate principal amount of its senior notes worth $650 million each, with one due 2029 and the other due 2032, the E&P said July 18. SM, an operator in the Midland Basin and South Texas, said it intends to use the net proceeds from the notes, plus cash on hand and borrowings under its credit agreement, to fund its pending $2.04 billion acquisition of XCL Resources. The XCL deal, which is anticipated to close in September, marks an entry for SM Energy into Utah's Uinta Basin. The company also plans to redeem all of its outstanding 5.625% notes due 2025 and pay related expenses.
The 2029 notes will be under a special mandatory redemption if the XCL acquisition is not closed by July 1, 2025, or if SM announces that it will not pursue the consummation of the XCL Acquisition, SM said. Fitch Ratings assigned a 'BB-'/'RR4' long-term rating to SM's proposed senior notes. The ratings remain on Rating Watch Positive (RWP), where they were placed on June 27, 2024. “The rating reflects SM's robust operating performance, consistent positive free cash flow and low leverage,” Fitch said on July 18. “The RWP reflects the increased size and scale, and improved netbacks and basin diversity from the acquisition of XCL's assets, along with leverage maintenance below 1.5x.
The proposed senior notes issue is in line with the financing considered at the time that Fitch placed the company's rating on Positive Watch.” View comments
SM Energy Offers Senior Notes to Help Fund $2B XCL Resources’ Deal
July 18, 2024 02:21 PM BST | By EODHD
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