Moody's lowers Penn Virginia

Moody's Investors Service said it downgraded Penn Virginia Corp.'s corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and senior unsecured notes rating to Caa1 from B3.

The downgrades include its $300 million 10 3/8% senior unsecured regular bond/debenture to Caa1 from B3 with its loss given default rating revised to LGD 4, 60 % from LGD 4, 67 %.

The company's $300 million 7¼% senior unsecured regular bond/debenture also was downgraded to Caa1 from B3 with its loss given default rating revised to LGD 4, 60 % from a range of LGD 4, 67 %.

The SGL-3 speculative-grade liquidity rating was affirmed.

Moody's also said it assigned a Caa1 rating (LGD 4, 60%) to Penn Virginia's proposed $400 million note offering.

The outlook was revised to stable from negative.

The downgrades follow news that the company agreed to acquire certain Eagle Ford shale assets from Magnum Hunter Resources Corp. for about $400 million, Moody's said. The acquisition will be financed with about 90% debt and 10% equity, the agency said.

From a strategic point, the new acreage is a great fit for the company's existing operations, Moody's said.

But Penn Virginia is paying a high multiple and significantly increasing its debt burden to accomplish its goal of becoming a predominantly oil and natural gas liquids producer, the agency said.

The ratings are supported by the company's increasing cash margins, low-risk, liquids-rich unconventional assets in the Eagle Ford shale and adequate liquidity through 2013, Moody's said.

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