S&P lifts Southern Star notes from junk

S&P said it raised the ratings on Southern Star Central Corp.'s $450 million 5.125% senior unsecured notes due 2022 to BBB- from BB+.

The agency also said it affirmed the BBB- issuer credit rating on Southern Star and the BBB- issue ratings on the senior unsecured debt at subsidiary, Southern Star Central Gas Pipeline Inc.

Southern Star paid down a significant portion of priority debt at the pipeline operating company that is now expected to make up less than 50% of the capital structure going forward, S&P said.

The stable outlook reflects an expectation that funds from operations-to-debt will remain at bout 12% to 13%, the agency said, while its debt-to-EBITDA ratio remains in the 5.5x to 6x range over the next two years as capital expenditures remain elevated.

The company continues funding new capital expenditure with debt, although EBITDA generated from its new modernization program and an upcoming rate case will help offset pressure to its credit metrics, S&P said.

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