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S&P downgrades Legacy Reserves on possible borrowing base reduction

S&P Global Ratings downgraded on the prospectthat the partnership's borrowing base will be substantially reduced uponredetermination in October.

Legacy's corporate credit rating was lowered to CCCfrom B-. Its rating outlook remains negative, S&P said in a Sept. 27 newsrelease. The rating agency also downgraded Legacy's issue-level rating on itsoutstanding senior unsecured notes to CCC- from CCC+.

S&P based its view on Legacy's limited access tocapital and credit markets, as well as previously stated uncertainty of futureliquidity from Legacy's lenders. "Legacy has stated publicly that itsbanking partners have been unwilling to act as counterparty on additional hedgepositions going forward, based on the company's credit profile and the banks'desire to reduce exposure to the oil and gas sector," S&P GlobalRatings said.

Legacy's borrowing base may be reduced to the currentoutstanding balance or lower, which would result in very weak liquidity,especially if the partnership is compelled to repay the deficiency, accordingto S&P Global Ratings.

S&PGlobal Ratings and S&P Global Market Intelligence are owned by S&PGlobal Inc.