S&P Affirms Ratings on HollyFrontier (HFC) Amid Move to Acquire Suncor Assets

October 31, 2016 11:11 AM EDT

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S&P Global Ratings said that it affirmed its 'BBB-' corporate credit rating on HollyFrontier Corp. (NYSE: HFC). The outlook is stable.

"The stable outlook reflects our belief that the company will successfully execute the acquisition and finance it in a manner that will result in consolidated leverage of about 1.5x under midcycle conditions and about 2.5x in a trough and recognizes that both its EBITDA and refining margins can be highly volatile," said S&P Global Ratings credit analyst Michael Grande. "We also expect HollyFrontier to maintain ample liquidity, including a sizable cash position, during periods of weak refining margins."

We could lower our ratings on HollyFrontier if it experiences operational difficulties, undertakes a leveraging transaction, or pursues less conservative financial policies or if we believe that the company's historical profitability will become less sustainable.

Given its current business mix, if the company's consolidated leverage approached 3x on a sustained basis, we could lower our ratings.

Given our assessment of HollyFrontier's business risk and its industry's inherent volatility, we currently view an upgrade as unlikely without increased scale and asset diversity while maintaining similar consolidated credit measures and consolidated leverage of less than 2.5x throughout the refining cycle.



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