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TEXT - Fitch affirms Nustar
2013年1月14日 / 晚上6点08分 / 5 年前

TEXT - Fitch affirms Nustar

Jan 14 - Fitch Ratings assigns a 'B+' rating to NuStar Logistics, L.P.'s
(Logistics) proposed issuance of junior subordinated notes due 2043. The new
notes are to be guaranteed by NuStar Energy L.P. (NuStar) and NuStar Pipe Line
Operating Partnership, L.P. (NPOP). Proceeds are to be used for general
partnership purposes which include the reduction of revolver borrowings 
which may be reborrowed to fund assets to be acquired. The notes are 
subordinated to the company's senior unsecured debt. Both Logistics and NPOP are
the operating limited partnerships of NuStar, which is a publicly traded master 
limited partnership. Fitch has also affirmed the ratings of Logistics and NPOP. 

Fitch rates Logistics and NPOP as follows:


--Long-term Issuer Default Rating (IDR) affirmed at 'BB';
--Senior unsecured debt affirmed at 'BB'; 
--Junior subordinated notes assigned 'B+'. 

--IDR affirmed at 'BB';
--Senior unsecured debt affirmed at 'BB'. 

Approximately $1.6 billion of existing senior unsecured debt at the combined 
partnerships is affected by today's rating actions (excluding the new junior 
subordinated notes). The Outlooks for Logistics and NPOP are Stable.  

The junior subordinated notes are assigned 50% equity credit under Fitch's 
hybrid criteria. The notching of the junior subordinated notes reflects Fitch's 
criteria which typically notches such hybrid securities two notches down from 
the IDR. 

Fitch Ratings downgraded the IDR of Logistics and NPOP in November 2012 which 
reflected the company's acquisition of assets from TexStar Midstream Services 
LP. The affirmed 'BB' rating reflects expectations for leverage to increase as a
result of the company's acquisition of Eagle Ford assets for approximately $425 
million in total. In December 2012, NuStar closed on the acquisition of crude 
oil assets for approximately $325 million. By the end of 1Q13, it expects to 
close on the acquisition of NGL assets for approximately $100 million. 

Additional investments in the assets are expected to be in the range of $400 to 
$500 million over the next 18-24 months. The company plans to fund the 
acquisition with revolver borrowings and with the issuance of junior 
subordinated notes. 


Ratings concerns center on the company's relatively low liquidity and high 
leverage metrics; the execution risks associated with the acquisition of TexStar
assets; and the significant increase in capex in 2013. Given NuStar's 
substantial investment in the acquisitions, and the need for the company to make
additional investments in its latest acquisition to realize its full earnings 
potential, Fitch also believes there is increased risk that EBITDA growth may 
not meet expectations. 

Factors which support the rating are NuStar's strong base of primarily fee-based
and regulated pipeline, terminalling and storage assets and its shrinking 
footprint in the higher volatility asphalt refining segment. These assets 
accounted for 80% of segment EBITDA in 2011 and could increase to 90-95% by the 
end of 2013. The company sold 50% of its asphalt operations in 3Q12 and closed 
on the sale of its San Antonio refinery in January 2013. Other factors include 
expectations for significant growth in EBITDA in 2013 for the storage and 
transportation segments, and sizeable and geographically diverse assets. 


As of Sept. 30, 2012 NuStar had $107 million of cash on the balance sheet. In 
addition, it had $1.1 billion of availability on its $1.5 billion revolver. 
However, liquidity is restricted by a leverage covenant and Fitch estimates 
availability to draw on the revolver was approximately $300 million. The 
company's $1.5 billion revolving credit facility expires in 2017. 

In December 2013, the 21 million UK 6.65% term loan is due. In 2013, $230 
million of notes are due in March and $250 million are due in June. 

NuStar received approximately $115 million for the San Antonio refinery 
(including $15 million for inventories) in January 2013. By the end of 1Q'13, it
expects to close on the $100 million of TexStar NGL assets. 


Leverage as defined by the bank agreement is to be no greater than 5.0x for 
covenant compliance. However, if NuStar makes acquisitions which exceed $50 
million, the bank defined leverage ratio increases to 5.5x from 5.0x for two 
consecutive quarters. Furthermore, the May 2012 bank agreement will exclude 
junior subordinated debt from the definition of debt for the leverage 
calculation if two of the three rating agencies assign the notes 50% equity 
credit. The junior subordinated notes meet Fitch's criteria for 50% equity 

NuStar has stated that leverage at the end of 3Q'12 was 4.3x as defined by the 
bank agreement and the maximum leverage allowed was 5.0x. Due to the acquisition
of TexStar assets, the maximum leverage for 4Q'12, 1Q'13, and 2Q'13 will be 
5.5x. Fitch believes liquidity may be tightened in 3Q'13 due to the maximum 
leverage ratio reverting to 5.0x. 

With 50% equity credit assigned to the planned issuance of junior subordinated 
notes, Fitch still expects leverage (debt adjusted for cash held in escrow for 
the future funding of construction and 50% equity credit for the junior 
subordinated notes to adjusted EBITDA) to be in the range of 4.8 - 5.0x by the 
end of 2013. 


Capital expenditures have been increasing. In 2011, capex was $336 million. 
NuStar has stated that in 2012, strategic capex is projected to be around $400 
million and reliability capex is to be $45 million to $50 million. With the 
pending acquisition of the TexStar assets and plans to invest significantly in 
the assets, Fitch expects capital expenditures to increase again in 2013. 

Logistics and NPOP are wholly owned subsidiaries of NuStar. NuStar guarantees 
the debt of Logistics and NPOP, and the debt instruments for the two operating 
partnerships have cross defaults and cross guarantees which closely link the 


Positive: Future developments that may, individually or collectively, lead to 
positive rating action include:

--Significant leverage reduction. Should leverage fall below 4.5x on 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:

--Reduced liquidity;

--Further deterioration of EBITDA; 

--Inability to meet growth expectations associated with the pending acquisition 
given the substantial investment;

--Significant increases in capital spending beyond Fitch's expectations or 
further acquisition activity which have negative consequences for the credit 

--Increased adjusted leverage beyond 5.5x for a sustained period of time.

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