DBRS Assigns Rating of BB (low) to Superior Plus LP’s $200 Million Senior Unsecured Notes, Stable

DBRS Limited (DBRS) has today assigned a provisional rating of BB (low) to the proposed $200 million Senior Unsecured Notes (the Notes) to be issued by Superior Plus LP (Superior LP or the Company). The trend is Stable. The provisional rating is based on a review of the draft Offering Memorandum dated and received from the Company on November 24, 2014, and the final rating will be assigned on receipt and review of the final documentation.

The Notes are to be unconditionally guaranteed, jointly and severally, by its operating subsidiaries and will rank pari passu with all senior unsecured debt of Superior LP and each guarantor. DBRS understands that the proceeds of the Notes will be used primarily to repay the Company’s borrowings under its revolving credit facilities and the issuance should not result in any material change in its total debt level. The Notes’ rating, which is two notches below Superior LP’s BB (high) Issuer Rating, reflects the Notes’ recovery rating of RR6 that indicates DBRS’s expectation of minimum recovery (0% to 10%) in event of default. Please refer to the DBRS rating report “Superior Plus LP” published on June 30, 2014, for detailed rating rationale and recovery analysis.

Superior LP’s operating results in the first nine months of 2014 were largely consistent with DBRS’s expectations. EBITDA and operating cash flow were sustained at levels similar to that in 2013 as continued demand growth in propane, recovery in the construction products distribution (CPD) segment, increased hydrochloric acid capacity and demand and improved cost efficiency were largely offset by a continued declined in heating oil demand, weak pricing in sodium chlorate and high electricity costs for the specialty chemical segment. Superior LP’s decision to not proceed with the sale of its CPD business by itself does not impact the ratings, as DBRS has not factored in the potential sale to its ratings. DBRS maintains its expectation that Superior LP will continue its effort to reduce its leverage (debt-to-EBITDA as defined for financial covenant in its credit agreements) toward its stated target range of 3.0 times (x) to 3.5x (3.9x as at September 30, 2014).

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

The applicable methodologies are Rating Companies in the Industrial Products Industry, Rating Companies in the Merchandising Industry and DBRS Recovery Ratings for Non-Investment Grade Corporate Issuers, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.