DBRS Places Superior Plus LP Senior Unsecured Debentures Rating Under Review with Positive Implications Following Announcement of Senior Unsecured Debt Issuances

DBRS Limited (DBRS) placed Superior Plus LP’s (Superior Plus or the Company) Senior Unsecured Debentures Rating of BB (low) Under Review with Positive Implications following the announcement that the Company will issue USD 350 million and CAD 100 million worth of unsecured notes versus drawing down under a secured committed bridge facility, as previously announced, to fund the acquisition of retail propane assets in the eastern United States (NGL Retail East) from NGL Energy Partners for USD 900 million. The $100 million issuance is to be executed as an add-on of the 2025 notes issued in February 2018. The remainder of the acquisition price is funded via an already closed $400 million equity issuance and revolver drawings. There is no change to the BB (high) Issuer Rating as a result of this announcement.

The Under Review with Positive Implications status for the Senior Unsecured Debentures rating is based on DBRS’s expectation that, at closing of the acquisition, which is expected in Q3 2018, the increased size and earnings generation of the Company will be such that the recovery of unsecured debtholders in a hypothetical default scenario would be greater than currently assessed and the debt being issued on an unsecured versus secured basis. DBRS assumes that at default using a multiple of baseline EBITDA, recovery available to unsecured debtholders would be between 10% and 30%, which aligns with a recovery rating of RR5. This implies adjusting down the Senior Unsecured Debentures rating by one notch compared with the Issuer Rating, as opposed to two notches as currently.

On May 31, 2018, DBRS confirmed both the Company’s Issuer Rating and Senior Unsecured Debentures ratings following the announcement that the Company had agreed to acquire NGL Retail East. The confirmation was consistent with DBRS’s view that the Company will be able to improve leverage to a level commensurate with the current rating in the near term (adjusted debt-to-EBITDA below 4.0 times and cash flow-to-debt above 20%) and reflects the Company’s proven track record of successfully integrating acquisitions and the similarity of the assets to be acquired with Superior Plus’s current operations in the northeastern United States.

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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The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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