S&P ups Medallion Gathering & Processing

S&P said it raised its ratings on Medallion Gathering & Processing LLC and its term loan to B+ from B. The loan’s recovery rating remains 3, which indicates meaningful (50%-70%; rounded estimate: 65%) recovery in default.

The agency noted Medallion’s robust performance over the past few years with throughput volumes climbing 12% to 596,000 barrels per day.

“We expect Medallion's credit metrics will continue to improve in 2023 and 2024. Our base case forecast assumes a reduction of adjusted debt to EBITDA to about 4x in 2023 from 4.5x in 2022, following our expected leverage ratio of 3.8x in 2024 given its steady volume growth expectations. We expect Medallion to have relatively modest capital expenditures (capex) in the range of $70 million-$75 million funded with internally generated cash and resulting in free cash flow in the range of $50 million-$60 million.

“In addition, Medallion's interest rate exposure is largely hedged for 2023, and it also maintains a debt service reserve account with an average balance of about $100 million,” S&P said in a press release.

The outlook is stable.

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