S&P Maintains Issuer Rating on Genesis Energy (GEL) Amid Gulf of Mexico Asset Acquisition Plans
- U.S. midstream energy partnership Genesis Energy L.P. recently announced it signed a definitive agreement to acquire Gulf of Mexico transportation assets from Enterprise Product Partners for $1.5 billion. These assets strengthen the issuer's participation in offshore crude oil and natural gas transportation; it is already a current stakeholder in certain of these assets.
- We expect Genesis' EBITDA to improve relative to debt outstanding under our contemplated default scenario.
- We are affirming our 'BB-' issuer credit rating on Genesis. We are also revising our issue-level rating on the partnership's senior unsecured debt to 'B+' from 'B' and our recovery rating on that debt to '5' from '6'.
- At the same time, we are assigning our 'B+' issue-level rating to Genesis' proposed $750 million senior unsecured notes due 2022.
- The stable outlook reflects our view that Genesis will maintain adequate liquidity and financial leverage, pro forma for completed growth projects, at between 4.5x and 5.0x.
Standard & Poor's Ratings Services said today it affirmed its 'BB-' issuer credit rating on Genesis Energy (NYSE: GEL). At the same time, we revised our recovery rating on its unsecured notes to '5' from '6' and, as a result, raised our issue-level rating on the notes to 'B+' from 'B'. We also assigned our 'B+' issue-level rating and '5' recovery rating to the partnership's proposed $750 million senior unsecured notes due 2022.
"The stable outlook reflects our view that U.S. midstream energy partnership Genesis Energy L.P. will maintain adequate liquidity and financial leverage, pro forma for completed growth projects, at between 4.5x and 5.0x," said Standard & Poor's credit analyst Michael Ferguson.
We could lower the rating if one or more of Genesis' business segments experiences sustained underperformance or has unanticipated operating difficulties or if Genesis makes a large acquisition that weakens the financial profile such that the debt-to-EBITDA ratio rises to more than 5x persistently.
Higher ratings are possible if Genesis expands into new geographic regions, maintains a significant portion of fee-based cash flows, and lowers total debt to EBITDA to about 4x.
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