Moody's confirms SemGroup

Moody's Investors Service said it confirmed SemGroup LP's Ba3 senior implied rating, Ba3 senior secured term loan rating and Ba2 rating for its working capital secured bank borrowing base revolver.

The company increased its term loan by $200 million to a new total of $400 million and working capital borrowing base revolver by $100 million to a new total of $725 million. The $175 million Canadian term loan and $50 million secured bank revolver remain unchanged. The increases fund SemGroup's most recent in a series of acquisitions ($481.5 million since year-end 2004) that were partly funded by $75 million of private equity.

The outlook remains stable, Moody's said.

Moody's said the ratings gain support from industry seasoned management; favorable profitability trends; the much reduced proportion of EBITDA generated by the marketing and hedged trading segment; an ability so far to essentially achieve its expected results from acquisitions; its ability to tap significant common equity to fund portions of acquisitions; its conservative policies and procedures; considerable restraint provided by the borrowing base, covenants, and banks that are seasoned in the midstream business; and the ability to operate profitably under those restraints.

Moody's added that the ratings are restrained by SemGroup's significant leverage and need to reduce that leverage; acquisition risk; heavy and volatile working capital needs; the challenges of an acquisition-driven growth strategy; the need for full-proof adherence to the company's conservative hedged trading policies and full-proof administrative and systems back-up to have correct information on the portfolio; and the general fact that the volatile, high volume, low margin, marketing and hedged inventory is not a source of firm support for the term debt structure.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.