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DUFF & PHELPS ASSIGNS INITIAL 'BB' RATING TO TRANSTEXAS GAS CORPORATION

 CHICAGO, Aug. 2 /PRNewswire/ -- Duff & Phelps Credit Rating Co. announced today that it has assigned an initial "BB" (Double-B) rating to TransTexas Gas Corporation's proposed offering of a $460 million issue of senior secured notes due 2000. The debt is secured by a first priority lien which is substantially all of the currently existing property and assets of the company. Additionally, the notes are unconditionally guaranteed on a senior secured basis by TransTexas's wholly owned subsidiary, TransTexas Transmission Corporation. Proceeds from the issue will be used to repay parent company debt, pay other parent claims, establish an escrow for litigation, make a distribution to the parent and for working capital.
 The "BB" rating reflects the senior position of the notes, relatively strong covenant protection and good operating record of the company offset by an above average risk profile. TransTexas' operations will consist of the natural gas exploration, production and transmission businesses of TransAmerican Natural Gas Corporation which will be transferred to TransTexas as part of this transaction. TransAmerican emerged from Chapter 11 bankruptcy in 1987 and is currently operating under a confirmed plan of reorganization. Upon completion of this transaction, all allowed claims under the Plan of Reorganization and TransAmerican's unsecured creditors will be fully satisfied.
 TransTexas has a good operating history in the Lobo trend of South Texas with a drilling success rate of over 85 percent and a demonstrated ability to replace production at low cost. However, TransTexas's reserves in South Texas are characterized by high initial production rates followed by a steep decline. Consequently, the company must continually find and develop new natural gas reserves to replace those being depleted by production. If the company becomes capital constrained and cannot sustain a relatively high level of drilling or if it is unsuccessful in replacing reserves, then cash flows and credit protection measures could come under pressure.
 TransAmerican, TransTexas' parent has filed for bankruptcy twice since 1974. To insulate TransTexas from its parent, covenants require that TransTexas maintain an independent board of directors, that the company offer to repurchase the notes with excess cash as well as limitations on restricted payments and additional debt incurrence. TransTexas will assume liability for substantially all litigation relating to the assets and businesses to which TransAmerican is currently a party, including issues in TransAmerican's bankruptcy, imparting additional risk to the credit. The rating assumes that these issued will be resolved without substantially affecting the credit quality of TransTexas.
 Credit protection measures are adequate. For the nine months ended April 30, 1993, EBIT coverage pro forma for the new debt was 2.25 times and is expected to climb as production increases with higher drilling activity. Balance sheet leverage is high, with TransTexas having negative equity as a result of the restructuring. Pro forma total debt to EBDIT for the nine months was 3.1 times.
 -0- 8/2/93
 /CONTACT: David W. Eisinger, CFA of Duff & Phelps Credit Rating Co., 312-368-3145/


CO: TransTexas Gas Corporation ST: Texas IN: OIL SU: RTG

TS -- NY046 -- 8290 08/02/93 10:51 EDT
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Publication:PR Newswire
Date:Aug 2, 1993
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