Moody's gives Renewable Energy notes B2

Moody's Investors Service said it assigned first-time ratings to Renewable Energy Group, Inc., including a B1 corporate family rating, a B1-PD probability of default rating and a B2 rating to the company's planned senior secured notes due 2028. The outlook is stable.

The company will use the proceeds along its $385 million equity offering gross proceeds, from March, will mostly be used to fund the expansion of renewable diesel production capacity at its Geismar facility. The Geismar expansion will increase the facility's nameplate renewable diesel production capacity to about 325 million gallons per year (MMGY) from 75 MMGY upon completion in late 2023.

"REG benefits from modest financial leverage, good liquidity, and its decade-long experience as a producer of bio-based diesel, including five years as a producer of renewable diesel at Geismar," said Arvinder Saluja, a Moody's vice president, in a press release.

"However, the company relies on state and federal regulatory mandates to support its earnings. In addition, the execution and integration risk related to the construction and operational ramp-up in three years of the Geismar expansion project constrain the company's credit profile," Saluja added.

The outlook reflects the expectation that REG will maintain low leverage and good liquidity while meeting development milestones for the Geismar expansion and that the regulatory backdrop would remain supportive, the agency said.

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