Moody's rates Alon USA Energy loan B2

Moody's Investors Service said it assigned a B2 corporate credit rating to Alon USA Energy Inc. and a B2 to the company's $450 million first-lien senior secured term loan facility. The outlook is positive.

The agency removed the corporate family rating from Alon USA Inc., a wholly owned subsidiary, and placed it at Alon USA Energy, which is now the public, parent company of Alon USA and the obligator of the new loan.

Proceeds from the facilities, along with cash on hand, will be used to purchase the assets of Paramount Petroleum Corp and the Edgington Oil Co., with the remaining proceeds available for general corporate purposes.

Moody's said the positive outlook reflects added scale and diversification that Alon Energy will get with its acquisition of Paramount and Edgington, which will effectively double the total throughput capacity of the company, reduce the overall reliance on the Southwest Texas products markets and provide a degree of earnings and cash flow diversification with the addition of the asphalt storage facilities.

The ratings remain restrained by the very high leverage the company is incurring to fund the essentially all-debt-funded acquisition of lower-complexity refineries and Moody's concern that the excess debt proceeds could be used to fund shareholder distributions given the controlling shareholder's track record of taking distributions from the company.

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