S&P Assigns 'B' Rating to American Midstream Partners (AMID); Outlook Stable

S&P Global Ratings said today it assigned its 'B' corporate credit rating to American Midstream Partners L.P. (NYSE: AMID). The outlook is stable.

We also assigned our 'B' issue-level rating and '3' recovery rating to American Midstream's $300 million senior unsecured notes due 2024. The '3' recovery rating indicates that lenders can expect meaningful (50% to 70%; higher half of the range) recovery in the event of a payment default.

"The stable outlook reflects our expectation that American Midstream Partners (on a pro forma basis merged with JPEP) will maintain debt to EBITDA of about 5x (including preferred equity classified as debt) and distribution coverage of about 1.2x in 2017," said S&P Global Ratings credit analyst Stephen Scovotti. "We also expect the company to maintain liquidity we view to be adequate. We expect the company to continue to be acquisitive, through dropdowns and third-party acquisitions, and expect it to fund any future acquisitions in a balanced manner using debt and equity."

We could lower the ratings if debt to EBITDA increased above 6x on a sustained basis. This could occur if the company adopts a more aggressive financial profile, which could include funding acquisitions primarily with debt. A negative rating action could also occur if volumes were lower than our expectations, resulting in weaker cash flows.

Although unlikely in the near-term, we could raise the ratings if the company is successful at operating its pro forma assets while increasing the size, scale, and diversity of the business. In addition, we would also need to see the company adopt a more conservative financial profile, including debt to EBITDA well below 5x on a sustained basis.

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