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Fitch rates Valero Logistics notes BBB-
Fitch Ratings said it assigned a BBB- issuer default rating to Valero Logistics Operations LP and a BBB- rating to its outstanding $350 million senior unsecured notes. In addition, Fitch affirmed the BBB- rating for Kanab Pipe Line Operating Partnership LP's outstanding $500 million senior unsecured notes. The outlook is stable.
The rating actions consider the eventual divestiture by Valero Energy Corp. of its indirect ownership in interest in Valero LP. Through Valero GP Holdings LLC, Valero Logistics owns the 2% general partner and a 21% limited partner interest in Valero LP. In addition to its ownership interest, services that Valero LP provides to Valero Logistics generate about 40% of Valero LP's EBITDA. Valero Logistics plans to sell 37% of its current 100% interest in Valero GP Holdings through an initial public offering expected to close in the second quarter and to ultimately sell its remaining interest.
Fitch said the pending sale is credit neutral and that it expects Valero LP to continue to generate credit measures consistent with its BBB- rating for the near term. Debt to EBITDA, which is currently 4.0x, should be in the 3.5x to 4x range for 2006.
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