S&P rates OPTI Canada loan BB+

Standard & Poor's said it assigned a BB long-term corporate credit rating to OPTI Canada Inc. and a BB+ rating with a recovery rating of 1 to OPTI's proposed seven-year $400 million secured term loan B. The outlook is stable.

The agency said the ratings on OPTI reflect the company's lack of internal cash flow generation, as it is currently in the precompletion phase of its Long Lake oil sands project, its high leverage and the risk of cost increases on construction of its project.

Somewhat mitigating these constraints are the above-average reserve life index of OPTI's oil sands leases, the substantial amount of capital costs already committed to the project, an expected stable production profile with negligible finding costs associated with oil sands extraction and the expectation that the OrCrude upgrading process will allow the company to generate competitive netbacks at cyclical peaks and troughs of the hydrocarbon price cycle, while also significantly reducing the company's exposure to natural gas fuel costs, the agency said.

S&P said OPTI's leverage after closing the loan will be in line with similarly rated exploration and production companies, with total debt to capital expected to be 48%.

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