Proceeds from the notes will be used to repay Enable's
A full list of ratings for Enable and Enable Transmission is at the end of this press release.
KEY RATINGS DRIVERS
Enable's ratings are supported by its strategy to operate with low leverage and to generate significant earnings from fee-based assets which provide stable cash flows. The rating is also supported by its size and scope.
The midstream assets contributed to form Enable are from
Midstream assets from
Ratings Issues: Fitch's credit concerns include commodity and volume exposure and the potential for strategic spending or acquisition activity to accelerate in order to support increased growth for distributions.
Liquidity: As of the first quarter of 2014 (1Q'14), liquidity was approximately
Since the end of 1Q'14, Enable had its IPO which generated
Financial covenants in the bank agreement include maximum leverage to debt ratio of 5.0x (bank agreement defined EBITDA), expanding temporarily to 5.5x in the event of acquisitions exceeding
Near-term debt maturities for Enable include the
Leverage: Enable's leverage as of 1Q'14 was 3.2x which remains low for an MLP with a 'BBB' rating. Fitch is raising its year end 2014 leverage target from 3.0x-3.25x to 3.25x-3.5x based on its expectations for borrowings to increase and fund spending needs.
Capital Expenditures: Since Enable is a limited partnership, Fitch expects it to spend significantly to grow EBITDA to support distribution growth. Growth capex in 2013 was
Hedging and Contract Mix: Enable does not have any material hedges. To mitigate commodity exposure, the company has a significant amount of gross margins from fee-based contracts and arrangements. In 2013, Enable estimates that approximately 76% of its gross margin was from fee-based contracts (with 39% of gathering and processing from commodity based contracts and 4% of transportation and storage).
Enable is an MLP which became public in
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
-- Positive rating action is not expected but could occur if leverage dropped below 2.0x on a sustained basis.
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
-- Material changes in management's strategy which creates a less favorable credit profile than Fitch's expectations;
-- Leverage (defined as debt to adjusted EBITDA) in excess of 3.75x on a sustained basis;
-- Significant increases in commodity-based gathering and processing contracts which would increase volatility of cash flows.
Fitch currently rates Enable as follows:
-- Long-term Issuer Default Rating (IDR) 'BBB';
-- Senior unsecured debt 'BBB';
-- Term loan and revolver 'BBB';
-- Expected short-term IDR and commercial paper (CP) rating 'F3'.
Fitch currently rates
-- IDR 'BBB';
-- Senior unsecured debt 'BBB';
-- Term loan 'BBB'.
Debt outstanding at Enable Transmission is guaranteed by Enable.
The Rating Outlook for both entities is Stable.
Additional information is available at 'www.fitchratings.com'.
-- 'Pipelines, Midstream, and MLP Stats Quarterly - Fourth Quarter 2013',
-- '2014 Outlook: Midstream Services',
-- 'Credit Considerations for the GP/LP Relationship',
-- 'Investor FAQs: Recent Questions on the Pipeline, Midstream, and MLP Sectors'
-- 'Tax Event Risk and MLPs: Assessing a Change in Tax Status for MLPs',
-- 'The Top Ten Differences Between MLP and Corporate Issuers',
-- 'Corporate Rating Methodology, Including Parent and Subsidiary Linkage',
-- 'Rating Pipelines, Midstream and MLPs - Sector Credit Factors',
Pipelines, Midstream, and MLP Stats Quarterly - Fourth-Quarter 2013
2014 Outlook: Midstream Services
Credit Considerations for the GP/LP Relationship
Investor FAQs: Recent Questions on the Pipeline, Midstream, and MLP Sectors
The Top Ten Differences Between MLP and Corporate Issuers
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Rating Pipelines, Midstream and MLPs - Sector Credit Factors
Tax Event Risk and MLPs: Assessing a Change in Tax Status for MLPs
Primary Analyst, +1-212-908-0290
Source: Fitch Ratings
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