DBRS Comments on Superior Plus LP’s Announcement Regarding the Sale of Some U.S. Energy Distribution Assets

DBRS Limited (DBRS) notes that on April 3, 2018, Superior Plus LP (the Company; Issuer Rating of BB (high) with a Stable trend) announced the sale of some of its wholesale refined fuels and retail distillate assets in the United States for total proceeds of about $72 million (about USD 56 million). The announcement is credit positive because the proceeds are expected to be used to repay the credit facility, which will improve both liquidity and leverage. With these divestitures, the Company is also increasingly focusing its U.S. Refined Fuels Distribution business on higher margin and more profitable businesses such as retail propane distribution. While these developments are credit positive, they do not affect the rating.

In 2018 and pro forma the anticipated debt repayment, DBRS expects leverage to modestly improve to levels that are well within DBRS’s expectation for the current rating, which DBRS anticipated to be above 20% for cash flow-to-debt and around 3.5 times (x) for debt-to-EBITDA in 2019. Pro forma liquidity will also improve with availability under the Company’s credit facility increasing to about $295 million from about $200 million as of December 31, 2017, as a result of the anticipated repayment using the $72 million asset sales proceeds and the issuance of $220 million unsecured notes in February 2018, the proceeds of which were used to subsequently repay the Company’s $200 million unsecured debentures maturing in 2021, and reduce the outstanding amount drawn under the credit facility. However, DBRS notes that the Company has been acquisitive and will continue to be, especially in the retail propane distribution sector, and DBRS expects debt-funded acquisitions and the associated re-leveraging to be likely in the near term.

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

The principal methodologies are Rating Companies in the Industrial Products Industry and Rating Companies in the Services Industry, which can be found on dbrs.com under Methodologies.

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