ALA : S&P Downgrades to P-3

Standard & Poor’s has announced:

  • •S&P Global Ratings lowered its long-term issuer credit rating on utilities and midstream company AltaGas Ltd. to ‘BBB-‘ from ‘BBB’. S&P Global Ratings lowered its rating on the company’s senior unsecured debt to ‘BBB-‘ from ‘BBB’. It lowered its global scale rating on the company’s preferred shares to ‘BB’ from ‘BB+’ and its Canada scale rating on the preferred shares to ‘P-3’ from ‘P-3(High)’.
  • •The company is continuing its capital program with a focus on organic opportunities in its midstream and utilities business.
  • •Notwithstanding asset sales and a dividend cut to fund its capital program, AltaGas’ financial metrics remain pressured.
  • •The negative outlook reflects the possibility that if the company is not able to undertake the proposed asset sales as forecast, further financial pressure will result.

The negative outlook reflects the uncertainty associated with the timing and pricing for the proposed asset sales to meet cash needs for the next two years. We expect the company will reduce debt, and that AFFO-to-debt will stay above 10% on a sustained basis by 2020, with regulated utility EBITDA representing approximately 50% of consolidated EBITDA.

We could lower the ratings if AltaGas is not able to sell the planned assets or receives lower-than-expected proceeds, or acquires debt that results in forecast AFFO-to-debt below 10%. We also expect the company to maintain its business mix, which is highly weighted toward the more stable utility cash flows. A material increase in the proportion of more volatile cash flows, such as from riskier midstream or unregulated power, without a corresponding improvement in financial metrics, could also lead to a downgrade.

We could revise the outlook to stable if AltaGas completes the sale as expected, maintains AFFO-to-debt in the 10%-12% range, and is able to successfully integrate WGL Holdings Inc. (and subsidiaries) (WGL).

Affected issues are: ALA.PR.A, ALA.PR.B, ALA.PR.E, ALA.PR.G ALA.PR.I and ALA.PR.K.

Leave a Reply

You must be logged in to post a comment.