S&P downgrades Teekay over acquisition debt

S&P dropped the company's long-term corporate credit rating and the rating on $350 million in senior unsecured bonds maturing in July 2011 by one notch to "BB" from "BB-plus." It revised the recovery rating on the bonds to "3" from "4," meaning a 50 percent to 70 percent chance of meaningful recovery in case of a payment default.

As of June 30, $226 million of the bonds were outstanding.

S&P analyst Greg Pau said the downgrade "reflects Teekay's weakened financial risk profile from the company's aggressive use of debt to finance its acquisitions and expand its fleet, as well as its exposure to the volatile spot tanker industry."

Pau said those factors were partly offset by the company's strong position in the shuttle tanker business, rising revenue from liquefied gas and offshore, and a young fleet.

S&P assigned Teekay a "stable" outlook, reflecting stronger offerings and market positions. But it said it's crucial that the company quickly improve its financial risk profile.

Teekay shares rose $1, or 2.9 percent, to close at $35.10.