S&P downgrades Maxum loan

Standard & Poor's said it lowered the $155 million term loan B of Maxum Petroleum Inc. to B- with a recovery rating of 5 from B with a recovery rating of 4. The B- rating is one notch below the B corporate credit rating of parent company and guarantor SPR Petroleum LLC.

The outlook is stable.

The agency said the change is in response to an increase in the size of Maxum's unrated asset-based revolving credit facility to $285 million from $235 million. The term lenders' lien on Maxum's accounts receivable, inventory and cash is junior to that of the asset-based revolver lenders. These working-capital assets represent the company's most significant and most liquid assets, so S&P expects the increases in the asset-based revolver to impair the term lenders' recovery prospects.

The ratings on Maxum reflect its participation in the very fragmented refined-product distribution market, which is characterized by slim operating margins and commodity price volatility, and the elevated debt leverage and integration risk associated with the company's acquisitive growth strategy, the agency said.

The ratings are supported by favorable near-term market conditions, SPR's leading market position and low maintenance capital expenditure needs, S&P said.

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