Southwestern Energy was upgraded to BB+ from BB by S&P. The rating upgrade comes on the back of the company completing the acquisition of GEP Haynesville LLC for about $1.85bn with $1.325bn in cash and $525mn of Southwestern common shares. The acquisition is said to increase Southwestern’s scale by boosting reserves and broaden diversity in two core basins, making it the largest natural gas producer in the Haynesville. Although the transaction increased total debt and leverage of Southwestern, its free cash flows are expected to meaningfully grow over the next 2 years helping pay down debt. Southwestern’s total debt was at $5.5bn pro forma the acquisition with the company planning to reduce it to $3-3.5bn and maintain a debt to EBITDA at 1-1.5x before it initiates shareholder returns.
Southwestern’s 4.75% 2032s were trading stable at 104.03, yielding 4.25%.
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