S&P lowers OPTI Canada

Standard & Poor's said it lowered its long-term corporate credit rating on OPTI Canada Inc. to BB- from BB because of increased debt levels and expected weak coverage metrics.

The outlook is stable.

At the same time, S&P said it lowered its bank loan rating on OPTI's C$500 million revolving credit facility to BB+ from BBB-, while maintaining a recovery rating of 1.

S&P said it also affirmed the BB+ senior secured debt rating on OPTI's $1.0 billion secured notes and raised the recovery rating to 1 from 2 and assigned a BB+ bank loan rating, with a recovery rating of 1, to OPTI's new seven-year $750 million secured notes.

According to the agency, the ratings on OPTI reflect the company's lack of internal cash flow generation, its high leverage and expected weak coverage metrics and the project's execution risk while somewhat mitigating these constraints are the above-average reserve life index of its oil sands leases, an expected stable production profile with negligible finding costs and the expected competitive netbacks and reduced natural gas fuel requirements associated with the patented OrCrude upgrading process.

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