Alliance Pipeline L.P., Alliance Pipeline Ltd. Partnership #BBB+# Issue Ratings Outlook Revised To Positive

Stocks and Financial Services Press Releases Friday June 29, 2018 10:53
SAN FRANCISCO--29 Jun--S&P Global Ratings

SAN FRANCISCO (S&P Global Ratings) June 28, 2018--S&P Global Ratings today affirmed its 'BBB+' senior secured debt rating and revised the outlook to positive from stable on Alliance Pipeline L.P.'s (Alliance U.S.) $850 million senior secured notes ($301 million outstanding as of Dec. 31, 2017) and Alliance Pipeline Limited Partnership's (Alliance Canada) C$1.5 billion senior secured notes (C$659 million outstanding as of Dec. 31 2017).

We revised our outlook on the partnerships' senior secured debt to positive based on continued robust pathway demand and strong competitive position, as well as the anticipation in our base case of rising debt service coverage ratios (DSCRs) and declining debt service payments after 2019. Stronger pipeline demand and a better financial picture are to some degree offset by a largely uncontracted capacity tail in the remaining years of debt amortization (2023-2025), which is stressed in our downside case. Further re-contracting through this period would reduce revenue uncertainty in the remaining years of rated debt amortization and increase the robustness of performance under our combined downside stress analysis.

We believe that Alliance will continue to benefit from the improving prospects of gas development and production in the WCSB, declining production costs, and improving well economics. Moreover, the pipeline runs right through the heart of the prolific Montney and Duvernay fields in western Canada and the Bakken oil basin in North Dakota. Furthermore, Alliance has a competitive advantage in its ability to transport relatively high amounts of NGLs contained in the gas stream to downstream processing markets in the upper Midwest.

The positive outlook reflects the Alliance Pipeline's rising DSCR, strong pipeline fundamentals, and declining debt service after 2019 through the remaining debt tenor. Further re-contracting efforts will reduce revenue uncertainty in the remaining years of rated debt amortization and increase the robustness of performance under our downside stress.

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