S&P assigns Howard B+, notes B

S&P said it gave Howard Midstream Energy Partners LLC a B+ issuer rating and rated its planned $400 million of senior unsecured notes due 2027 B with a 5 recovery rating. The 5 recovery rating indicates an expectation for modest (10%-30%; rounded estimate: 10%) recovery in default.

“HEP's predominantly fee-based contract profile and limited commodity exposure provides reasonable certainty about future cash flows to the business. We expect EBITDA to remain fairly stable through 2022 but increase by about $35 million in 2023 once the Port Arthur project is fully operational to over $255 million. We expect adjusted debt to EBITDA to be about 5.6x in 2021, stepping up to the low- to mid-6x range in 2022 while the company undergoes material construction projects. By 2023, we expect leverage to normalize in the mid-5x area,” S&P said in a press release.

HEP will use the proceeds to repay borrowings on its unrated revolver.

The outlook is stable.

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