PrefBlog

DBRS greeted news of Husky’s divestment programme with marked restraint:

DBRS views the impact on Husky’s business risk profile as marginally negative due to a lessening in the integration and diversification of the Company’s asset base. The midstream segment has provided a source of stable cash flow partially offsetting the significant erosion in cash flow from oil and gas production activities. DBRS also notes that the Transaction will result in a minor negative impact on Husky’s cash flow (expected 2016 EBITDA contribution from the assets is approximately $180 million; however, Husky will retain a 35% share of EBITDA). However, more importantly, the impact on the Company’s financial risk profile is positive. The Company plans to use the proceeds from the sale to strengthen the Company’s financial position and enhance liquidity. At March 31, 2016, Husky’s total debt was $6.98 billion and the Company had no cash on the balance sheet. For the past 12 month ended March 31, 2016, the Company’s total debt-to-cash flow ratio was 2.90 times (x; up from 2.42x at end of 2015) and total debt in the capital structure was 30.2%. On a pro forma basis, assuming proceeds (before transaction costs) of $1.7 billion are applied to debt reduction, DBRS estimates a total debt-to-cash flow ratio of 2.31x and a ratio of total debt in the capital structure of approximately 24.7%. The Transaction on a stand-alone basis has no immediate impact on the Company’s Issuer Rating and Senior Unsecured Notes and Debentures rating of A (low), the Commercial Paper rating of R-1 (low) and the Preferred Shares – Cumulative rating of Pfd-2 (low).
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DBRS at this time maintains a Negative trend on Husky’s ratings as the low oil pricing environment continues to weigh on the Company’s cash flow generation and key credit metrics. However, if the Company successfully completes the asset sale program and/or if oil prices recovery materially, DBRS will review the rating and likely change the trend back to Stable.

This entry was posted on Saturday, April 30th, 2016 at 12:06 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.