HSE Downgraded to P-3(High) by S&P

Standard & Poor’s has announced:

  • •S&P Global Ratings lowered its long-term issuer credit rating on Calgary, Alta.-based Husky Energy Inc. to ‘BBB’ from ‘BBB+’, based on the forecast deterioration of its cash flow metrics.
  • •We have removed the ratings from CreditWatch Negative, where they were placed Oct. 1, 2018.
  • •We are also lowering our senior unsecured debt rating to ‘BBB’ from ‘BBB+’.
  • •We also lowered our global scale preferred stock rating to ‘BB+’ from ‘BBB-‘, and lowered our Canada scale preferred stock rating to ‘P-3(High)’ from ‘P-2(Low)’.
  • •The stable outlook reflects our expectation that Husky should be able to maintain its cash flow and leverage metrics within the 35%-40% range throughout our 24-month outlook period. Cash flow metrics at these levels would adequately support the ‘BBB’ rating.

Our weakened Brent and West Texas Intermediate (WTI) price assumptions, compounded by our decreased Canadian heavy oil and natural gas prices, result in the company’s three-year weighted-average funds from operations (FFO)-to-debt ratio falling into the 35%-40% range. Cash flow metrics in this range, and our expectation of ongoing dividend payments, result in a deteriorated financial risk profile. Despite this deterioration, we believe the company’s overall credit profile, characterized by the scale and breadth of Husky’s upstream operations, and the integration benefits of its midstream assets, and downstream segment, continue to support an investment-grade rating.

Affected issues are HSE.PR.A, HSE.PR.B, HSE.PR.C, HSE.PR.E AND HSE.PR.G.

It will be recalled that I reported the Credit Watch Negative in October (which was concerned with the now-aborted MEG acquisition) and found the experience so enjoyable I reported it again in November.

DBRS confirmed its Pfd-2(low) rating in November and took no rating action when the MEG acquisition was aborted.

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