Moody’s gives Phillips 66 notes Baa3

Moody's Investors Service said it assigned a Baa3 senior unsecured rating to Phillips 66 Partners LP's proposed $1.1 billion senior unsecured notes.

The outlook is stable.

Proceeds will be used to partially fund a $1 billion dropdown of assets from its parent, Phillips 66, and will go toward repayment of a $412 million sponsor loan. A $450 million equity offering to be completed prior to the notes issuance will be used to repay the $58 million revolver balance, finance roughly $200 million of the dropdown and fund 2015 organic capex.

Moody’s said the Baa3 senior unsecured rating reflects Phillips 66 Partners’ Ba1 standalone credit profile and one notch of uplift from Phillips 66 (A3 stable), which owns Phillips 66 Partners’ 2% general partner interest, 73% limited partner interest and incentive distribution rights. The Ba1 standalone credit profile reflects Phillips 66 Partners’ small size, limited time as a standalone company, high distributions associated with the master limited partnership structure and a reliance on debt and equity capital markets to fund growth, the agency said.

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