DBRS Confirms Superior Plus LP at BBB (low) and BB (high) with Stable Trends

DBRS has today confirmed the Senior Secured Notes and Senior Unsecured Debentures ratings of Superior Plus LP (Superior or the Partnership) at BBB (low) and BB (high), respectively, both with Stable trends, following the announcement and closing of the acquisition of Griffith Energy, Inc. (Griffith Rochester) for the total aggregate price of US$125 million ($130 million) before working capital adjustments.

The rating confirmations are based on DBRS’s expectation that the acquisition will be accretive to cash flow (the Partnership forecasts five cents per share in 2010) and will have a minimal impact on Superior’s key credit metrics. The transaction was initially funded with the Partnership’s $570 million credit facility ($124 million available post-acquisition), and will be refinanced with a combination of debt and equity. The Partnership has entered into a bought deal to raise gross proceeds of approximately $60 million in equity (with an over-allotment option to $69 million) which is expected to close on or about February 10, 2010. The transaction price equates to approximately 5.7 times annualized EBITDA, which is reasonable. DBRS expects the transaction to have a modestly positive impact on Superior’s business risk profile as it expands its share in the refined fuel distribution and energy services business in the growing markets in the northeastern United States.

This acquisition marks the Partnership’s fourth since September 2009 (including Specialty Productions & Insulation, Sunoco Retail Heat (SRH) and Griffith Energy Services (GES)) for an aggregate cost of approximately $450 million, which together are expected to lead to a material increase in EBITDA going forward. With the increased EBITDA from the recent acquisitions and from its specialty chemicals business following the completion of the Port Edwards expansion, DBRS expects the Partnership’s credit metrics to improve over time and to move towards its long-term targeted debt-to-EBITDA levels: senior debt: 1.5 times (x) to 2.0x and total debt: 2.5x to 3.0x.

Griffith Rochester is a retail and wholesale distributor of retail propane, heating oil and motor fuels in upstate New York with 27 branch locations, 26 bulk storage facilities and three storage terminals, providing 20 million gallons of storage capacity. The acquisition is complementary to SRH and GES, purchased in September and December 2009, respectively, and in line with the Partnership’s strategy to target and grow its heating oil and propane distribution business in the northeastern United States and eastern Canada.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is General Rating Methodology for Non-Financial Companies, which can be found on our website under Methodologies.

This is a Corporate rating.