Moody's affirms Valero Energy

Moody's Investors Service said it affirmed Valero Energy Corp.'s Baa3 senior unsecured debt rating with a stable outlook.

The rating action was prompted by the announcement by Valero LP, Kaneb Services LLC and Kaneb Pipe Line Partners LP on Monday that they have executed definitive agreements to merge Valero LP and Kaneb Pipe Line Partners. The total value of the transaction is about $2.8 billion, consisting of $525 million in cash to acquire 100% of Kaneb Services' common stock, debt assumption of about $700 million, and about 24.8 million Valero common units (subject to an exchange ratio collar).

The stable outlook reflects Moody's expectation that the acquisition of Kaneb is unlikely to increase Valero's financial leverage sufficiently to pressure its ratings, Moody's said.

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