OREANDA-NEWS. S&P Global Ratings lowered its issue-level rating on Seven Generations Energy Ltd.'s US450 million 6.875% notes due 2023 to 'B' from 'B+' and revised its recovery rating on the notes to '6' from '1'. The '6' recovery rating indicated negligible (0%-10%) recovery in a default scenario. Our 'BB-' long-term corporate credit and 'B' issue-level ratings on the company are unchanged. The outlook is stable.

Seven Generations concluded the acquisition of Paramount Resources Ltd.'s Montney Nest Assets Aug. 18, 2016. As a result, the company assumed Paramount's US$450 million 6.875% notes due 2023.

"As our recovery analysis shows, in a default scenario, the secured creditors would be fully covered, but the remaining value for unsecured noteholders is negligible, resulting in the '6' recovery rating," said S&P Global Ratings credit analyst Wendell Sacramoni.

In addition, Seven Generations completed its bought-deal equity financing on July 26, 2016, raising C$717 million in net proceeds and increasing its existing reserve-based credit facility to C$1.1 billion from C$850 million concurrent with the acquisition's closing. These actions have limited impact on our credit metrics, liquidity, and recovery analysis and are approximately in line with our expectations (for more information, see "Seven Generations Energy Ltd. Upgraded To 'BB-' On Expected Improved Performance With Montney Assets' Acquisition," published July 13, 2016, on RatingsDirect.

The stable outlook reflects our expectation that the increased production and cash flow growth will met our base-case scenario, and that the company will have sufficient funds to finance the acquisition and its capital spending plan with adequate liquidity.