Moody's Affrims StoneMor (STON) at 'B2'; Modest Profitability Growth Expected

Moody's Investors Service affirmed the ratings of StoneMor Partners, L.P. (NYSE: STON) including the B2 Corporate Family rating ("CFR"), the B2-PD Probability of Default rating ("PDR") , the SGL-3 Speculative Grade Liquidity rating and the B3 senior unsecured bond rating. The ratings outlooStoneMor Partners L.P. (NYSE: STON)
k remains stable.

On September 26, 2013, StoneMor and the Archdiocese of Philadelphia entered into a purchase-like lease agreement for 13 cemeteries that required StoneMor to pay $53 million at closing on May 28, 2014. On April 2, 2014, StoneMor agreed to acquire 9 funeral homes, 12 cemeteries, 2 crematories and certain related assets from Service Corporation International, Inc. ("SCI") for $54 million. Moody's expects the acquisition to close in June, 2014. On May 19, 2014, StoneMor announced that American Infrastructure MLP Funds ("AIM") committed up to $130 million of equity capital, including $55 million of four-year, non-cash common units, to fund the lease and the acquisition. On May 29, 2014, StoneMor announced that it priced approximately $58.2 million (net of underwriting discount and offering expenses) of common units, the proceeds of which it plans to use to fund the lease and acquisition and to reduce revolver borrowings.

RATING RATIONALE

The affirmation of the B2 CFR and B3 senior unsecured note rating reflects Moody's expectations for debt to increase as StoneMor implements pre-need selling programs at its newly-acquired properties. The financing of the Archdiocese of Philadelphia cemetery lease and SCI acquisition with new equity will increase its accrual revenues by 25% to 30% without adding any additional debt initially, lending support to the ratings. StoneMor's small revenue size and Moody's expectations for negative free cash flow driven by aggressive cash distribution policies required by its master limited partnership structure weigh on the ratings. Moody's anticipates StoneMor will continue to be an opportunistic acquirer of cemetery and funeral properties. Liquidity is considered adequate.

The stable outlook anticipates modest profitability growth (accrual basis) over the next year driven by recent acquisitions. The ratings could be pressured by a decline in accrual earnings attributable to slowing pre-need sales or difficulty integrating acquisitions. In addition, the ratings could be lowered if liquidity deteriorates due to weaker earnings or a more aggressive cash distribution policy, or Moody's expects free cash flow to debt and retained cash flow to net debt (both ratios before distributions) to be sustained near or below 0%. If debt to accrual EBITDA rises above 5 times, a downgrade is also possible. The ratings could be upgraded if a sustained improvement in profitability results in Moody's anticipating a sustained reduction in GAAP financial leverage, free cash flow to debt (before distributions) of about 12% and positive free cash flow (after distributions).

Affirmations:

..Issuer: StoneMor Partners LP

.... Corporate Family Rating, Affirmed B2

.... Probability of Default Rating, Affirmed B2-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-3

....Senior Unsecured Bond due Jun 1, 2021, Affirmed B3 (LGD5, 71% revised from LGD4, 69%)

....Outlook, Remains Stable

The principal methodology used in this rating was the Global Business & Consumer Service Industry Rating Methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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