S&P puts Valero on watch

Standard & Poor's said it placed its ratings on Valero LP and related entities and its ratings on Kaneb Pipe Line Operating Partnership LP on CreditWatch with negative implications.

The CreditWatch listing follows the announcement that Valero LP and Kaneb Partners will merge.

Provided that the transaction is not modified materially, S&P said it will downgrade the ratings of Valero LP (the combined entity) on the close of the transaction to BBB-, and the outlook at that level would likely be negative.

At this time, S&P said it would not downgrade Valero LP's ratings to BB+ unless the cash component of the transaction increases or either party engages in additional transactions that materially increase its debt burden. Future leveraging transactions could tip Valero LP's ratings to BB+.

S&P currently rates Valero LP's corporate credit and senior unsecured debt BBB and Kaneb Pipe Line Operating Partnership LP's corporate credit and senior unsecured debt BBB.

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