How Will This Note Reshuffle Impact Petroquest Energy Inc. (NYSE: PQ)?


Petroquest Energy Inc. (NYSE: PQ) has kicked off an exchange offer targeting certain holders of its senior notes. The company intends to replace those notes with new ones that will mature in 2021.

Petroquest Energy Inc. (NYSE: PQ) is specifically targeting $145 million under its 10% senior secured second-lien notes together with 10% senior unsecured notes. The plan is to issue the holders of those old notes with new senior secured notes that will become due in 2021 and the issuance is being done at par value.

Financing commitment

Petroquest could qualify for $50 million in term loan if it successfully completes the exchange offer of its $145 million senior secured and unsecured notes. If it does get the term loan, Petroquest would significantly boost its liquidity position considering that the company had cash balance totaling $69 million at the end of 2Q2016.

Some experts cast doubts on the exchange

Though Petroquest is hoping to strengthen its balance sheet and improve its liquidity standing through the notes reshuffle, some experts are wary of the transaction. Analysts at S&P Global Ratings are among those taking Petroquest’s notes exchange offer with a hefty grain of salt. As such, the analysts have downgraded Petroquest’s corporate credit rating to CC from CCC. That signals a negative outlook.

The specific reason S&P Global Ratings analysts decided to downgrade Petroquest Energy Inc (NYSE:PQ) is that they see the exchange offer a being a distressed transaction. They pointed out that investors will end up getting less from the notes than what they were originally promised.

Stock upgrade – Zosano Pharma Corp. (NASDAQ: ZSAN)

While credit analysts appear to be raising the red flag over Petroquest Energy Inc (NYSE:PQ)’s notes reshuffle, equity analysts see a positive outlook for investors in the company. The analysts at both Seaport Global and Johnson Rice upgraded their rating on the stock of Petroquest to a BUY. Seaport previously had a CUMULATE rating on the stock. In addition to rating upgrade, Seaport also boosted its price estimate on the stock to $5 from $4.


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