S&P assigns B+ to Kodiak, notes

S&P said it assigned a B+ rating to Kodiak Gas Services LLC and its planned $750 million of senior unsecured notes due 2029. The recovery rating on the notes is 4. The outlook is positive.

In conjunction with Kodiak's all-equity acquisition of CSI Compressco and the assumption of CSI Compressco's debt, Kodiak will sell $750 million in notes. The company will use proceeds to fully repay CSI Compressco’s $643 million of debt, including a prepayment penalty of about $8 million, and to partially repay borrowings on Kodiak's revolving asset-based loan.

“As a result of the acquisition Kodiak will be the largest provider of natural gas compression services in the U.S. with 4.3 million horsepower and S&P Global Ratings-adjusted-EBITDA in the $600 million-$700 million range over our forecast period. Sixty-five percent and fourteen percent of Kodiak's fleet is situated in the Permian and Eagle Ford basins, respectively,” S&P said in a statement.

The outlook reflects the position that Kodiak will close on the acquisition of CSI Compressco in the second quarter of 2024 and recapitalize CSI's debt. “We forecast S&P Global Ratings-adjusted debt-to-EBITDA of approximately 4.1x in 2024, falling to 3.7x in 2025,” the agency said.

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