Skip to main content
OCC Flag

An official website of the United States government

Appeal of Shared National Credit (SNC)-(Fourth Quarter 2016)


A participant bank appealed the special mention rating assigned to a revolving credit facility during the August 2016 SNC examination.


The appeal asserted that the credit should be rated pass. The appeal argued that the company has long life reserves, a strong hedge profile, a strong management team, and adequate liquidity. In response to low commodity price concerns, company management set forth a plan to rightsize the borrowing base, inject equity, facilitate a sale of assets for liquidity, and repay the revolver. The appeal asserted that as a result of the actions, the spring of the year redetermination reflected a fully conforming borrowing base, decreased leverage, and increased liquidity.


An interagency appeals panel of three senior credit examiners concurred with the SNC examination team’s originally assigned risk rating of special mention.

The appeals panel concluded that the special mention rating is warranted due to adverse financial conditions that present potential weaknesses, including declining revenue, declining cash flow, marginal liquidity, and the lack of demonstrated performance to the updated plan. Financial performance deteriorated over the past year due to decreased commodity prices and production.

The appeals panel considered the impacts of the recent equity injection and asset sale in concluding on the appropriate risk rating. While these positive improvements are noted, the appeals panel determined that the special mention rating was appropriate given the historical results and uncertainty regarding the company’s ability to meet updated cash flow projections. In addition, liquidity only marginally covers projected capital expenditures.