The new entity will be
The Outlook is Stable.
KEY RATINGS DRIVERS
The 'BBB-' rating is supported by the company's size, geographic diversity, and ability to invest in growth opportunities that should drive increases in EBITDA and distributable cash flows. Past acquisitions and strategic capex initiatives have already proven to create growth. Fitch believes that the partnership will increase its geographic diversity with the pending acquisition of assets in the
Currently, Buckeye has a significant presence in the
Assets to be acquired in Corpus Christi include a deep water marine terminal, a condensate splitter to be completed in mid-2015 and total petroleum product storage of 5.6 million barrels once construction is complete. In the Eagle Ford, there are three crude and condensate gathering facilities. BTP will invest between
Concerns include integration risk of the pending large acquisition, leverage, increases in capex for strategic growth projects, and distribution coverage which may fall slightly below 1.0x over the next few quarters.
Leverage: Buckeye's leverage remains high and for the LTM ending
Fitch forecasts 2014 yearend leverage to be in the range of 5 -5.5x. As assets in the
Liquidity: As of
The credit agreement states that BES shall not be held jointly and severally liable for any obligations of Buckeye for the credit agreement or other debt. At the end of any fiscal quarter, leverage (as defined by the bank agreement) cannot exceed 5.0x. If an acquisition is
For the bank defined leverage ratio, 'consolidated funded debt' allows for exclusion of BES's letters of credit and revolver borrowings. Like other MLP's, the bank definition of EBITDA allows for a pro forma adjustment for 'material projects'.
Fitch projects that Buckeye will continue to generate credit ratios which provide it with sufficient covenant cushion for the bank agreement. Buckeye has
Diverse operations: Buckeye's assets are reasonably diverse although the domestic pipelines and terminals segment dominates contributions to earnings. For the LTM ending 2Q'14, that segment contributed 73% of adjusted EBITDA while international pipelines and terminals contributed to 28%. Buckeye Services contributed negative EBITDA for the LTM.
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
--Significant leverage reduction. Should leverage fall below 4.0x over a sustained period of time, Fitch may take positive rating action.
Negative: Future developments that may, individually or collectively, lead to a negative rating action include:
--Lack of improvement at the energy services segment without substantial growth in other segments;
--Inability to meet growth expectations associated with the pending acquisition or with expansion projects given the substantial investments in prior acquisitions;
--Significant increases in capex or acquisitions not funded in a balanced way;
--Increased adjusted leverage beyond 5.5x for a sustained period of time and distribution coverage below 1.0x.
Additional information is available at 'www.fitchratings.com'.
--'Midstream Spending Significantly Rising for MLPs and C-Corps' (
--'Liquidity Review: Pipelines, Midstream and MLPs' (
--'Crude Oil and Refined Products Pipelines Dashboard' (
--'Pipelines, Midstream and MLP Stats Quarterly - First-Quarter 2014' (
--'Non-Traditional MLP Assets (Changing Mix, Changing Risk)' (
--'Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage' (
--'Rating Pipelines, Midstream and MLPs - Sector Credit Factors' (
Midstream Spending Significantly Rising for MLPs and C-Corps
Liquidity Review: Pipelines, Midstream and MLPs
Crude Oil and Refined Products Pipelines Dashboard
Pipelines, Midstream and MLP Stats Quarterly - First-Quarter 2014 (First-Quarter Review)
Non-Traditional MLP Assets (Changing Mix, Changing Risk)
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Rating Pipelines, Midstream and MLPs - Sector Credit Factors
Source: Fitch Ratings
Most Popular Stories
- U.S. Families 'Extraordinarily Vulnerable': Yellen
- Hillary Clinton to Address CHCI Conference
- Larry Ellison Steps Down as Oracle CEO
- Alibaba Prices IPO at $68 a Share
- Apple Locks Itself Out of Devices
- Veterans to Get Training as Solar Panel Installers
- Hispanics Doubt Marco Rubio's Chances
- Wildfires Rage in California
- John Cantlie Delivers ISIS Message to Save Life
- Alibaba: Today China, Tomorrow the World