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S&P rates Transmontaigne loan BB-
S&P said it assigned Transmontaigne Operating Co. LP’s (TM OpCo) planned $1 billion senior secured term loan BB- issue and 2 (85%) recovery ratings. The 2 recovery rating indicates an expectation for substantial recovery in default. The agency also gave a B+ rating to the operating company, which also plans to obtain a $150 million revolver.
TM Opco will use the proceeds to fund the acquisition of SeaPort Financing, an Arclight Fund VI portfolio company. The proceeds will also be used to repay about $350 million outstanding on the revolving credit facility at TransMontaigne Partners LLC (TLP), partially repay $173 million on the term loan B at TLP Finance Holdings (Holdings), pay down outstanding debt at SeaPort and fund a distribution to Pike Petroleum, the owner of Holdings.
Concurrently, S&P lowered TLP’s issuer rating to B+ from BB- and the senior unsecured notes B- with a 6 (0%) recovery from B+' with a 5 (25%) recovery rating. The 6 recovery rating indicates an expectation for negligible recovery in default.
“Although we expect the company to fully repay the existing revolving credit facility at TLP and repay a portion of the existing term loan at Holdings, the $1 billion term loan at TM OpCo elevates consolidated credit metrics so that consolidated adjusted debt to EBITDA of TLP remains above 6.5x during our forecasted period. As a result, we lowered our rating at TLP by one-notch.
This constrains the credit quality of TM OpCo, which we view to have a stand-alone credit profile of bb-. That said, with minimal forecast capital expenditures in 2022, we expect TM OpCo to generate at least $130 million in free operating cash flow,” S&P said in a press release.
The outlook is stable.
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