Moody's rates Knife River notes Ba3

Moody's Investors Service said it assigned a first-time Ba2 corporate family rating and Ba2-PD probability of default rating to Knife River Holding Co. Moody's also assigned a Ba3 rating to Knife River's proposed senior unsecured notes and a speculative grade liquidity rating of SGL-2.

The outlook is stable.

MDU Resources Group, Inc., Knife River’s parent company, is spinning off Knife River via a tax-free transaction to existing MDU shareholders. The spinoff will likely occur within the next few months, at which time the company will change its name to Knife River Corp. from Knife River Holding Co., Moody’s said.

“Knife River's first-time Ba2 CFR reflects Moody’s expectations of conservative financial policies, including low leverage and a good liquidity profile,” according to Peter Doyle, a Moody's VP-senior analyst, in a news release.

“Knife River will benefit from infrastructure spending, further supporting the company's credit profile.”

Knife River's capital structure will comprise a senior secured bank credit facility (not rated by Moody's), consisting of a $350 million revolving credit facility and a senior secured term loan, and senior unsecured notes. Proceeds from the term loan and notes will be used to pay a $700 million dividend to MDU.

Borrowings at closing under the revolver are used for working capital, which will be repaid by year-end 2023 from cash flow.

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