These actions follow the cooperative's Oct. 21 bankruptcy filing under Chapter 11 of the U.S. Bankruptcy Code. According to SME, the filing was in response to failure on the part of some of its members to honor contractual obligations, including payment to the cooperative for services.
"We view this action as a strategic bankruptcy filing, driven by disputes between members," said Standard & Poor's credit analyst Peter Murphy. However, we view the filing as creating a potential risk that SME might not honor its debt payment obligations, and might otherwise potentially affect the cooperative, including affecting its access to capital markets and bank financing.
We expect to resolve the CreditWatch placement within the next 90 days. If the cooperative defaults on its debt payments, we will lower the rating to 'D'. If the underlying issues that prompted SME's board to file for bankruptcy are resolved favorably, we could raise the rating.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Applying Key Rating Factors To U.S. Cooperative Utilities, Nov. 21, 2007
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Ola Fadahunsi, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Peter V Murphy, New York (1) 212-438-2065
David Bodek, New York (1) 212-438-7969