Moody's rates Forest Oil notes B1

Moody's Investors Service said it assigned a B1 (LGD5, 73%) rating to Forest Oil Corp.'s $350 million five-year senior unsecured notes and affirmed its Ba3 corporate family and probability-of-default, ratings and B1 (LGD5, 73%) senior unsecured note ratings.

The speculative grade liquidity rating was lowered to SGL-3 from SGL-2.

The outlook was changed to stable from positive.

Proceeds will help repay debt under the first secured borrowing base revolver.

The outlook reflects the low likelihood that the company could reduce leverage sufficiently under current down-cycle conditions to warrant an upgrade, the agency said.

Ratings are supported by seasoned leadership with a history in onshore exploitation, supportive hedges, diversified reserves and large diversified drilling inventory, sufficient margin coverage of cash costs and reserve replacement costs, and an adequate capital and liquidity structure to ride out the down cycle, Moody's said.

Ratings are restrained by medium reserve and production, reduced 2009 production trend due to reduced capital spending and need for sustained drilling success with its properties acquired during 2008, the agency said.

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