S&P rates Connacher debt BB-

Standard & Poor's said it assigned a BB- issue rating and 1 recovery rating to Connacher Oil and Gas Ltd.'s proposed $900 million senior secured second-lien debt. A 1 recovery rating indicates expectations of very high (90%-100%) recovery in a default scenario.

This new debt issue will effectively refinance the company's existing senior secured first- and second-lien debt, the agency added.

Connacher should be able to refinance its debt at more favorable terms than those associated with its current senior secured first- and second-lien debt, the agency added. Moreover, this bond issue will allow the company to extend its debt maturity profile.

The B long-term corporate credit rating and stable outlook on Connacher reflect the view of the company's highly levered balance sheet, the weak cash flow protection measures associated with gross debt levels and exposure to volatile hydrocarbon prices and light-heavy oil price differentials, the agency added.

The ratings also consider the company's large oil sands resource base, good visibility to long-term drill-bit-related production growth and the potential for strong operating cash flows, the agency said.

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