DBRS Upgrades Superior Plus LP’s Senior Unsecured Debentures to BB and Removes Under Review with Positive Implications Status

DBRS Limited (DBRS) upgraded Superior Plus LP’s (Superior Plus or the Company) Senior Unsecured Debentures rating to BB from BB (low) and removed the Under Review with Positive Implications status following the completion of the acquisition of retail propane assets in the Eastern United States (NGL Retail East) from NGL Energy Partners LP for USD 900 million. The acquisition price was funded through the issuance of USD 350 million and $150 million worth of senior unsecured notes. The remainder of the acquisition price was funded via a $400 million equity issuance and revolver drawings. There is no change to the BB (high) Issuer Rating as a result of this announcement, and trends on all ratings are Stable.

On June 29, 2018, DBRS placed the Senior Unsecured Debentures rating Under Review with Positive Implications after Superior Plus announced that the acquisition of NGL Retail East would be funded with senior unsecured debt versus secured, as originally announced. The upgrade of the Senior Unsecured Debentures rating is consistent with DBRS’s view that the increased size and earnings generation of the Company is now such that the recovery of unsecured debtholders in a hypothetical default scenario would be greater than previously assessed. 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 previously.

On May 31, 2018, DBRS confirmed both the Company’s Issuer Rating and Senior Unsecured Debentures rating 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 ratings 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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