S&P assigns GIP II, loan BB-

S&P said it assigned BB- ratings to GIP II Blue Holding LP (HESM HoldCo) and its planned $750 million senior secured term loan B due 2028. The loan’s recovery rating is 3, indicating an expectation of meaningful (50%-70%; rounded estimate: 55%) recovery in default.

HESM HoldCo is a subsidiary of Global Infrastructure Partners that owns about a 45% effective interest in Hess Midstream Operations LP (HESM) and its subsidiaries.

“Our BB- issuer credit rating on HESM HoldCo reflects the difference in its credit quality relative to that of HESM. HESM HoldCo relies exclusively on distributions from HESM to service its term loan because it does not have any other substantive assets. Therefore, we rate HESM HoldCo under our noncontrolling equity interest (NCEI) criteria. Because of this, the rating incorporates our view of HESM's cash flow stability, as well as HESM HoldCo's financial ratios, its ability to influence HESM's financial policy, as well as its ability to liquidate its investment in HESM to repay its $750 million senior secured term loan,” the agency said in a press release.

The outlook is stable and reflects a forecast that HESM will hike its distributions by at least 5% annually, which will lead HESM HoldCo to sustain a leverage ratio of 3x and an EBITDA interest coverage ratio above 6x in 2022, S&P said.

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