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Global Credit Research - 14 Feb 2011
Approximately US$150 million of rated debt affected
New York, February 14, 2011 -- Moody's Investors Service assigned a B3 rating to Baytex Energy Corp.'s
offering of US$150 million of senior unsecured notes. Proceeds
from the notes will be used to repay outstanding revolver debt.
Concurrent with the bond issue, Moody's will move the Corporate
Family Rating (CFR) and Probability of Default Rating (PDR) of Baytex
Energy Ltd. to Baytex Energy Corp., as this is now
the top most legal entity within the corporate family having rated debt.
In addition, Moody's is correcting the description in its database
of 9.15% C$150 million notes due 2016 to senior unsecured.
Due to an administrative error, they were initially labelled as
senior subordinated notes. The rating on the notes is unaffected
by today's correction. The rating outlook is stable.
Baytex's B1 Corporate Family Rating reflects its 80% oil-weighted
production platform and favorable leveraged full cycle ratio, growing
production profile and favorable leverage on production, and solid
finding and development costs. At the same time the rating considers
Baytex's relatively small reserves, short reserve life in
terms of proved developed (PD) reserves, although its reserve life
has expanded with recent acquisitions, and the company's very
high dividend payments.
The stable outlook reflects Baytex's growing production profile and oil
bias. A rating upgrade is unlikely in the near term given Baytex's
relatively small reserves for a B1 rated exploration and production (E&P)
company and short reserve life. However, a change in outlook
to positive would be considered if the reserves profile was expanded while
consistently generating positive free cash flow. A negative outlook
or downgrade could be considered if the company was unable to replace
reserves at competitive costs and its 3-year drill-bit finding
and development costs including revisions appeared likely to be sustained
above $21, if E&P Debt to PD Reserves appeared likely
to be sustained above $11 or E&P Debt plus Future Development
Capex to Total Reserves moved to $13.
The B3 rating of the senior unsecured notes reflects both the overall
probability of default of Baytex, to which Moody's assigns
a PDR of B1, and a loss given default of LGD5 (83%).
The note rating is two notches below the B1 CFR because of the very high
level of prior ranking debt in the capital structure, principally
comprised of the company's C$625 million revolving credit
facilities. The senior notes are unsecured and therefore are subordinate
to the senior secured credit facility's potential priority claim
to the company's assets. This notching is in accordance with
Moody's Loss Given default Methodology.
The principal methodology used in this rating was the Independent Exploration
and Production (E&P) Industry rating methodology published December
Please see the ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
Baytex Energy Corp. is a Calgary, Alberta based independent
exploration and production company focused on heavy oil with primary assets
in Western Canada.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
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Please see the ratings disclosure page on our website www.moodys.com
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Senior Vice President
Corporate Finance Group
Moody's Canada Inc.
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's rates Baytex Energy's new notes B3
250 Greenwich Street
New York, NY 10007
No Related Data.
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