Moody’s assigns Houston Fuel loans Ba2

Moody's Investors Service said it assigned a Ba2 rating to the $625 million senior secured credit facilities to be issued by Houston Fuel Oil Terminal Co.

The outlook is stable.

The $625 million in credit facilities is made up of a $550 million seven-year senior secured term loan B due 2021 and a $75 million five-year revolving credit facility due 2019.

The new facilities will refinance existing debt of $181.7 million at Houston Fuel, repay $275 million of existing debt (rated Ba1 stable) at the holding company parent, Buffalo Gulf Coast Terminals, LLC, fund a portion of the expected growth capital expenditures, and pay breakage and transaction costs. The $75 million revolver will be used for general corporate purposes.

Moody’s said the Ba2 rating reflects the highly contracted nature of the cash flows, the low operating risks associated with this storage asset, its strong market position and its strategic location at the mouth of the Houston Ship Channel. The rating also considers the credit quality of the contract counterparties, the contract diversification and Houston Fuel’s track record in renewing expiring contracts and in adding new customers.

The Ba2 factors in management's generally conservative approach for expanding capacity, which includes securing contracts prior to spending growth capex, the agency said.

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