Moody's rates Western Oil loan Ba2, lifts notes to Ba2

Moody's Investors Service said it assigned a Ba2 rating (LGD3, 32%) to Western Oil Sands Inc.'s pending five-year C$805 million senior secured bank revolver. The agency also affirmed the Ba2 corporate family rating and upgraded the company's notes to Ba2 (LGD3, 32%) from Ba3 (LGD4, 64%).

The outlook is stable.

The agency said the ratings reflect the issuer's independence and the possibility of its takeover by a larger company with stronger debt ratings. The company also benefits from its minority holding in the Athabasca Oil Sands Project and the high quality of the project's oil sands properties.

The ratings are tempered by the company's negative cash flow after capital spending for many years, soaring leverage and many new project risks, Moody's said.

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