Moody's downgrades Harvest

Moody's Investors Service said it downgraded Harvest Operations Corp.'s corporate family rating to Ba3 from Ba2, probability of default rating to Ba3-PD from Ba2-PD and $500 million senior bonds due 2017 to B1 (LGD4, 61%) from Ba3 (LGD4, 64%) and upgraded its speculative grade liquidity rating to SGL-3 from SGL-4. The outlook was changed to stable from negative.

The A1 rating and stable outlook for the bonds guaranteed by Korea National Oil Co. are unchanged.

"The downgrade reflects Harvest's high leverage on all metrics and very weak operating efficiency," Paresh Chari, a Moody's analyst, said in an agency news release. "The drain on cash flow from the refining business has increased debt levels and decreased the capital spent on production, which will decline again in 2014."

The SGL-3 speculative grade liquidity rating reflects adequate liquidity, the agency said.

The stable outlook reflects the improved liquidity position and Moody's expectation that BlackGold will be completed in 2014 and the refinery will be less of a cash flow drain on Harvest primarily due to a reduction in planned capex.

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