S&P ups Harvest, notes; rates notes AA-

S&P said it raised its long-term corporate credit rating on Harvest Operations Corp. to CCC+ from SD (selective default).

The outlook is negative.

At the same time, the agency assigned its AA- issue-level rating to the company's $195.8 million 2.33% senior unsecured notes maturing April 2021, as the guarantee from parent company, Korea National Oil Corp. (KNOC), satisfies the criteria for credit substitution. As such, S&P rates the new debt issue at the same level as KNOC's existing senior unsecured debt.

S&P also raised its senior unsecured debt rating on Harvest's remaining $282.5 million, 6 7/8% notes maturing in 2017 to CCC from D and revised the recovery rating to 5 from 4, indicating an expectation of modest (10%-30%; in the upper half of the range) recovery in our simulated default scenario.

"The ratings reflect our estimates of negative FFO generation during our current forecast period, Harvest's significantly constrained liquidity position, and the company's need for external funding beyond the next 12 months to meet its financial obligations and minimum maintenance capital spending requirements," S&P credit analyst Michelle Dathorne said in a news release.

The rating on the senior unsecured notes without a parental guarantee reflects the agency’s revised recovery estimates for holders of these bonds under its simulated default scenario.

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