Moody's ups SemGroup, rates loan Ba3

Moody's Investors Service said it upgraded SemGroup LP's senior implied rating to Ba3 from B1 and upgraded SemCrude LP's existing secured debt ratings by one notch and assigned a Ba3 rating to a new $175 million senior secured fourth tranche (for SemCams Holding Co.), taking the total senior secured credit facility to $924.6 million.

The outlook is stable.

Moody's said the upgrades are supported by SemGroup's significantly larger, more diversified business mass; significantly greater proportion of durable fee-based fixed assets; industry seasoned management; demonstrated execution of balanced growth and funding strategy; acceptable pro-forma leverage for the ratings; and history of executing conservative policies, procedures, and controls over covered merchant marketing and trading.

The ratings are restrained, Moody's said, by a large merchant marketing and trading business requiring daily back office precision and strict adherence to hedging policy and procedure; related heavy and volatile working capital needs; increased leverage after the CAMS acquisition, though acceptable for the ratings and on a more durable asset base; still modest levels of term loan B and the Canadian term loan collateral cover by fixed assets; acquisition and releveraging risk, though acquisitions over $50 million require bank consent; and the challenges of an acquisition-driven growth strategy in an extremely competitive midstream acquisition market.

More specifically, Moody's upgraded to Ba2 from Ba3 SemCrude's $550 million (was $400 million) working capital borrowing base revolver maturing August 2008; Moody's upgraded to Ba3 from B1 SemCrude's $50 million (unchanged) revolver maturing Aug. 28, 2008; and Moody's upgraded to Ba3 from B1 a $150 million (was $100 million) six-year term loan B;

Also, Moody's assigned a Ba3 rating to a new $175 million six-year Canadian term loan for SemCams Holding Co., first secured by the borrower's and all guarantors' fixed assets and junior secured by all borrower and guarantor working capital assets.

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