S&P: Valero unaffected by acquisition

Standard & Poor's said Thursday that its rating and outlook on Valero Energy Corp. (BBB/negative/--) would remain unchanged by its acquisition of El Paso Corp.'s Aruba refinery for $365 million, and related marine, bunkering, and marketing operations for $100 million.

In addition, Valero will pay an estimated $250 million for working capital.

S&P said the transaction is expected to be neutral to credit quality as Valero will finance about $350 million of the total purchase price with the proceeds of a new common equity offering (as the company has advertised for many months), leaving S&P's estimation of the company's total adjusted debt leverage and debt to EBITDA largely unchanged. The remainder of the purchase price will be paid from cash on hand and borrowings on Valero's credit facilities.

While the cash portion of the Aruba transaction will reduce Valero's liquidity by about $365 million and Valero will make investments to improve the refinery's reliability and operating efficiency that likely will consume the refinery's cash flow in 2004, Valero's pro forma available bank borrowing capacity and cash on hand should total about $1.1 billion, which is ample for the company's 2004 cash needs, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.