Reliance Intermediate Holdings LP: Rating Report

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Notes rating of Reliance Intermediate Holdings LP (HoldCo or the Company) at BB with Stable trends. The ratings of HoldCo are notched down from its operating subsidiary, Reliance LP (OpCo; rated BBB (low) with a Stable trend by DBRS), reflecting (1) structural subordination of debt at HoldCo relative to OpCo, (2) the high level of leverage at HoldCo and (3) reliance on a single operating subsidiary for cash distributions. The current ratings of the Company assume that there will be no material change in the outstanding debt balance in the medium term, as HoldCo does not have any credit facilities and the debt matures in 2023. Any material incremental debt at the HoldCo level could have negative credit implications, as non-consolidated leverage is high (60.0% at December 31, 2017). DBRS’s criteria guidelines provide for more than a one-notch differential if the holding company’s non-consolidated debt leverage is above 30%.