Moody's Investors Service said Wednesday it had lowered its corporate credit rating for Connacher to Caa1 from B3 and its rating for US$600 million of second-lien notes due December 2015 to Caa2 from B3.

It has also given a rating of B1 to Connacher's proposed US$150 million first-lien notes.

"The lowering of the ratings reflects the higher debt burden assumed by Connacher through the first lien notes issue and the associated high interest rate anticipated on these notes," Moody's said.

The rating agency said it expects Connacher to have high debt levels relative to its earning power over the next few years but expects it to "have sufficient liquidity over the next 12 to 15 months to complete Algar and cover its other cash requirements during this period."

Moody's estimated Connacher's capital expenditures for all of 2009 and 2010 will be more than $350 million if Algar goes forward, which the cost of completing Algar estimated at $200 million of that.