Moody’s lowers Inter Pipeline bond to Baa1

Moody's Investors Service said it downgraded Inter Pipeline (Corridor) Inc.’s C$150 million senior unsecured bond to Baa1.

The action follows the May 31 closing of the transaction by Canadian Natural Resources Ltd. (Baa3/stable) through which Canadian Natural Resources acquired a combined 70% equity interest in the Athabasca Oil Sands Project from Shell Canada Ltd. and Marathon Oil Corp.

Upon the closing of the acquisition transaction, the ownership of Athabasca Oil will be held by Canadian Natural Resources and its subsidiary, Canadian Natural Upgrading Ltd. (a combined 70% ownership share), a subsidiary of Chevron Corp. (20%, Aa2/stable) and an affiliate of Royal Dutch Shell plc (10%, Aa2/stable).

Upon the completion of the acquisition of the Athabasca Oil, Canadian Natural Resources, through its subsidiary, has become the majority owner of the Athabasca Oil and is the majority offtaker under the sole revenue contract of Inter Pipeline.

While it is expected that the operating profile and financial projections for Inter Pipeline will remain the same as prior to the acquisition transaction, Moody’s said the credit strength of the shippers and the guarantors is a key determinant of the rating due to the limited number of shippers.

As such, the downgrade of the rating to Baa1 reflects the overall decline in credit quality of Inter Pipeline’s counterparty as a result of the change in ownership in the Athabasca Oil, the agency explained.

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