S&P rates Kodiak Gas notes B-

S&P said it assigned a B issuer credit rating to Kodiak Gas Services LLC based on S&P’s view that the company will maintain high leverage over the next few years as the company expands its asset base, primarily in Texas and Oklahoma.

S&P said it also assigned a B- issue-level rating to the senior unsecured notes based on a 5 recovery rating (rounded estimate: 25%).

The outlook is stable.

Kodiak is issuing $400 million of senior notes due in 2027 to repay a portion of its revolver borrowings in advance of “robust capital spending plans” over the next few years, S&P said.

“We expect leverage to average about 6.75x through 2020, which is very high among peers. Under our base-case scenario, we expect the company to deleverage materially in 2020 such that debt to EBITDA falls and stays below 6.5x,” S&P said in a news release.

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