HollyFrontier eyes notes sale for Petro-Canada Lubricants acquisition

By Devika Patel

Knoxville, Tenn., Oct. 31 – HollyFrontier Corp. may issue senior notes to finance its planned C$1.13 billion, or about $845 million, acquisition of Suncor Energy’s Petro-Canada Lubricants business. The company says its balance sheet can easily handle $500 million of additional debt and that the deal will be funded with a combination of debt and cash on hand.

“This value-enhancing transaction is possible in part because of our strong balance sheet and liquidity position,” chief executive officer and president George J. Damiris said on the company’s conference call announcing the acquisition on Monday.

“We expect to fund the $845 million purchase price with a combination of cash on hand as well as a possible new senior note issue.

“To illustrate our balance sheet capacity, adding $500 million of additional debt would increase HollyFrontier’s standalone debt to cap from 11% to 19%,” Damiris said.

Damiris also said the company expects to maintain its ratings, and has spoken with the rating agencies to confirm this.

“We intend to maintain our investment-grade rating as we think it provides us with an important competitive advantage,” Damiris said.

“After extensive visits with both Moody’s and S&P, we are confident we will maintain our current ratings with this acquisition and the anticipated financing scenarios.

“Looking ahead, we expect to continue to generate strong cash flows and maintain our disciplined approach to allocating capital to maximize return for our shareholders,” Damiris said.

The acquisition is expected to close in the first quarter of 2017.

HollyFrontier is a petroleum refiner based in Dallas.

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