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28 Apr 2006
MOODY'S ASSIGNS Ba3 SENIOR SECURED CREDIT RATING TO NISKA GAS STORAGE AND Ba3 CORPORATE FAMILY RATING
First Time Rating - Approximately $1.05 Billion of Credit Facilities Affected
New York, April 28, 2006 -- Moody's Investors Service assigned a Ba3 rating to Niska Gas Storage's
(which is comprised of Niska GS Holdings I, L.P.,
Niska GS Holdings II, L.P., and subsidiaries)
$1.05 billion senior secured credit facilities and a Ba3
corporate family rating. The ratings outlook is stable.
Through the newly formed entities comprising Niska Gas Storage (Niska),
Carlyle/Riverstone Global Energy and Power Funds II and III (Riverstone)
entered into agreements to purchase substantially all of the natural gas
storage assets of the EnCana Corporation (EnCana) for approximately $1.5
billion. The credit facilities are comprised of a $700 million
seven-year Term Loan B facility; a $250 million five-year
revolving credit facility; and a $100 million five-year
asset sale term loan facility that is expected to be paid down with proceeds
from sale of non-cycling working gas inventory by the end of the
storage cycles in 2007 and 2008. Along with approximately $750
million of sponsor equity, the $1.05 billion credit
facilities will be used to fund the acquisition along with related fees
The assigned ratings and rating rationale are comparable to other midstream
businesses rated in the speculative grade range by Moody's.
In support of the ratings, Moody's observes large first-in
cash equity; a long established business, operating at key
strategic regional hubs in the North American natural gas logistical infrastructure;
an underlying contracted core revenue and earnings base (the credit facility
requires 70% of capacity be committed on term contracts);
the investment grade ratings of its contracted customer base; the
company's position as the largest independent natural gas storage
operator in North America; a well-structured collateral package;
and a free cash flow sweep of 50% to 75% at certain leverage
tests. ; to provide a stronger credit support and lower business
risk profile for the Ba3 ratings than B1 rated midstream deals.
The company's strategically positioned depleted gas reservoir assets
have proven commercial value, recently received very substantial
additional capital investment from Encana, and will have low cushion
gas requirements after additional investments made by Niska. The
AECO Hub assets in Alberta, Canada are situated in one of the largest
and most liquid natural gas markets in North America. The company's
U.S. assets, Wild Goose and Salt Plains are amongst
the largest independent storage and highest deliverability operations
in their respective regional markets, as well. Niska will
also obtain the rights to develop a high multiple cycle salt dome facility
in Louisiana, though, development of the project will require
substantial capital outlays, which the company may fund with financing
independent of the rated facilities.
Niska's Ba3 ratings are restrained by considerable initial leverage;
highly volatile working capital requirements and possible commodity price
risk related to the company's optimization business; the limited
ability of depleted reservoir storage systems (compared to salt dome storage
systems) to augment earnings by meet sharp surges in withdrawal demand
and less frequent ability (versus salt dome storage) of depleted reservoir
storage to turnover its volumes during a given year; and the on-going
requirements to re-negotiate the current short-term storage
contracts at prevailing market rates.
Through its Canadian subsidiaries, the company will acquire approximately
125 Bcf of storage capacity at the AECO hub in Alberta, Canada.
The U.S. subsidiaries will control approximately 24 Bcf
of storage at Wild Goose, 15 Bcf of capacity at the Salt Plains
facility in Oklahoma; along with the rights to possibly develop a
new facility with 27 Bcf of storage capacity at the Starks facility in
Louisiana; and 8.5 Bcf of capacity on the Natural Gas Pipeline
System in the mid-continent market region.
The increase of the effective capacity at the company's facilities
without a material increase in leverage; the development of the Starks
facility with a clear funding strategy supported with an equal portion
of equity; a reduction in debt through the sale of NCWG with proceeds
paying off the Asset Term Loan; and a continued supportive commodity
price environment, may cause the ratings to go up.
A materially debt funded acquisition; a shift in management strategy
away from the durable contract storage business to more speculative marketing
activities; development of the Starks facility with little or no
equity; or a substantial fall in natural gas storage prices,
would all contribute to pressuring the ratings downward.
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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