Delek Logistics Partners L.P. Assigned #B+# Corporate Credit Rating, Outlook Debt Also Rated

Stocks and Financial Services Press Releases Tuesday May 16, 2017 09:57
NEW YORK--16 May--S&P Global Ratings
  • Tennessee–based midstream energy master limited partnership Delek Logistics Partners L.P. and co-issuer Delek Logistics Finance Corp. are issuing $250 million of senior unsecured notes due 2025.
  • The partnership expects to use net proceeds from this offering to repay a portion of outstanding borrowings on the revolving credit facility.
  • We are assigning our 'B+' corporate credit rating to Delek Logistics Partners L.P. The outlook is stable.
  • We are also assigning our 'B' issue-level rating and '5' recovery rating to the partnership's proposed $250 million senior unsecured notes and our 'BB' issue-level rating and '1' recovery rating to the partnership's $700 million revolving credit facility.
  • The stable outlook reflects our expectation that the partnership will maintain adequate liquidity, adjusted debt to EBITDA of about 4x, and a distribution coverage ratio above 1x as it grows through asset drop downs from parent company, Delek US Holdings Inc.

NEW YORK (S&P Global Ratings) May 15, 2017--S&P Global Ratings said today it assigned its 'B+' corporate credit rating to Delek Logistics Partners L.P. The outlook is stable. The stand-alone credit profile (SACP) is 'b', and we view the partnership as strategically important to its ultimate parent and owner of its general partner, Delek US Holdings Inc.

We also assigned our 'B' issue-level rating and '5' recovery rating to the partnership's proposed $250 million senior unsecured notes due 2025. The '5' recovery rating indicates that lenders can expect modest (10%-30%; rounded estimate: 15%) recovery of principal in the event of a payment default. At the same time, we assigned our 'BB' issue-level rating and '1' recovery rating to the partnership's $700 million revolving credit facility. The '1' recovery rating indicates that lenders can expect very high (90%-100%; rounded estimate: 95%) recovery in the event of a payment default.

"The stable rating outlook reflects our expectation that the partnership will maintain adequate liquidity, adjusted debt to EBITDA of about 4x, and a distribution coverage ratio above 1x while it grows through asset drop-downs from parent company Delek US Holdings Inc.," said S&P Global Ratings credit analyst Mike Llanos.

We could lower our rating on the partnership if Delek US Holdings' creditworthiness deteriorated as a result of a prolonged period of weak refining margins, which we believe could harm Delek Logistics since it is the partnership's largest customer. We could also consider lower ratings if the partnership pursued an aggressive financial policy such that adjusted debt to EBITDA were sustained above 5x and the distribution coverage ratio were consistently below 1x.

Though unlikely in the next two years due to the partnership's limited scale, we could consider higher ratings if Delek Logistics diversified its asset base and improved its scale while maintaining credit metrics at current levels or if Delek US significantly improved its scale and diversity, which would provide additional midstream growth opportunities.


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