S&P puts Southwest Gas on positive watch

S&P said it removed all its ratings on Southwest Gas Holdings Inc. (SWX) and its subsidiary Southwest Gas Corp. (SWG) from CreditWatch, where it placed them with developing implications on March 2 and assigned positive outlooks. S&P placed MountainWest Pipeline LLC’s ratings, including the BBB- senior unsecured rating, on CreditWatch with positive implications.

Additionally, the agency revised the outlook on subsidiary Centuri Group Inc. to developing from stable and affirmed the B+ issuer credit and first-lien term loan ratings. The 3 recovery rating on the term loan remains unchanged, indicating meaningful recovery in default.

SWX agreed to sell its MountainWest subsidiary to the higher-rated Williams Cos. for $1.5 billion, including $450 million of debt. The deal is expected to close in 2023. The company also announced its plans to spin off Centuri into a stand-alone, fully independent public company pending approval by the Arizona Corp. Commission.

“Upon the completion of its sale of MountainWest and its spin off of Centuri, we expect to update our base-case forecast to reflect that the company derives 100% of its EBITDA from its lower-risk utility operations under SWG, which is up from roughly 50%-55% currently. Therefore, we anticipate this will lead to an improvement in its consolidated business risk,” S&P said in a press release.

The positive outlook on SWX and SWG reflects the potential of a rating upgrade by one or more notches over the next 12 months due to an expectation for an improvement in the group's business risk following its sale of MountainWest and spin-off of Centuri, the agency said.

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