Moody's affirms NuStar, Kaneb

Moody's Investors Service said it affirmed the Baa3 senior unsecured note ratings of NuStar Logistics, LP (formerly Valero Logistics Operations, LP) and Kaneb Pipe Line Operating Partnership, LP, both of which are wholly-owned subsidiaries of NuStar Energy L.P. (formerly Valero, LP).

However, the outlook is changed from stable to negative, Moody's said, noting that this action is prompted by NuStar Energy's pending acquisition of the long-established Citgo Asphalt Refining Co. from Citgo Refining for $450 million plus $100 million of existing inventory.

The move to a negative outlook reflects that Citgo Asphalt injects substantial cyclical, seasonal and geopolitical risk into NuStar's heretofore fee-based cash margins, significant additional volatile working capital investment needs associated with Citgo Asphalt's crude oil and product inventories, increased sustaining capital spending needs, significant downtime risk that is inherent to refining operations, new environmental risk exposures and political risk exposure to the critical seven-year Boscan and Bachaquero crude oil supply contract extended to NuStar by Petroleos de Venezuela, SA, the agency said.

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