Fitch rates Lower Cadence loan BB

Fitch Ratings said it assigned a first-time long-term issuer default rating of B+ to Lower Cadence Holdings, LLC, along with a BB rating and recovery rating of RR2 to the company's proposed senior secured term loan B.

The recovery rating of RR2 indicates 71% to 90% expected default recovery.

The outlook is stable.

Stonepeak Cadence Holdings, LLC, an affiliate of Stonepeak Infrastructure Partners, is acquiring all assets of Oryx Southern Delaware Holdings LLC (Oryx I) and Oryx Delaware Holdings LLC (Oryx II) for a purchase price of about $3.6 billion, Fitch said.

The transaction will consolidate Oryx I and II into a single borrower and will be funded with a $1.5 billion senior secured term loan B, $150 million super priority revolving credit facility and $2.393 billion of Stonepeak and Management rollover equity.

A portion of the proceeds from the $1.5 billion term loan will be used to repay the remaining balance on the existing Oryx I's $800 million term loan and $80 million super priority revolver, Fitch noted.

The ratings reflect the favorable production economics associated with Lower Cadence's footprint in the Permian basin and the expected cash flow stability under its fixed fee contract profile, the agency said.

The ratings also recognize Lower Cadence's size and scale, high initial leverage level, counterparty risk, project execution and volumetric risk, Fitch said, as well as competitive risks that the company faces as a single basin crude oil Gathering and transportation service provider.

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