Moody’s gives Ba3 to Tesoro notes

Moody's Investors Service said it assigned a Ba3 rating to Tesoro Logistics, LP’s (TLLP) proposed $750 million senior unsecured notes due 2025.

The notes are being co-issued by Tesoro Logistics Finance Corp.

The company primarily intends to use the notes proceeds to repay borrowings outstanding under Tesoro’s revolving credit facility, which is primarily used to fund dropdowns.

The company’s Ba2 corporate family rating, positive outlook and all other ratings are unchanged.

As of Nov. 28, Tesoro had $760 million outstanding under the $1 billion dropdown revolver. After the notes issuance, it will have $10 million borrowed under its dropdown revolver, and no borrowings under its other $600 million revolver.

"TLLP's proposed notes offering will ensure ample availability under both revolvers well into 2017," Moody's vice president, senior analyst Arvinder Saluja said in a news release.

The senior unsecured notes are rated Ba3, reflecting their junior position to both the senior secured first lien revolving credit facilities' priority claim to company assets, the agency explained. The size of the senior secured claims relative to Tesoro’s outstanding senior unsecured obligations results in the notes being rated one notch below the Ba2 corporate family rating, consistent with Moody's Loss Given Default Methodology.

The unsecured notes have upstream guarantees from substantially all of Tesoro’s subsidiaries.

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