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Rating Action:

Moody's affirms IEP's Ba3 CFR following announcement of capital market transactions

07 May 2019

New York, May 07, 2019 -- Moody's Investors Service ("Moody's") affirmed Icahn Enterprises L.P.'s (IEP) Ba3 Corporate Family Rating following the company's announcement to issue new senior unsecured notes due 2026 and its previously announced plan to issue $400 million of depository units. The proceeds from these transactions will be used for potential acquisitions, debt repayment, as well as for general limited partnership purposes. Moody's also affirmed the company's Probability of Default Rating at Ba3-PD. The outlook remains stable.

The following ratings were affirmed:

Issuer: Icahn Enterprises L.P.

Corporate Family Rating, Ba3

Probability of Default Rating, Ba3-PD

Backed Senior Unsecured Notes, Ba3

The following ratings were assigned:

Backed 6.25% Senior Unsecured Notes due 2026 at Ba3

Outlook, remains Stable

RATINGS RATIONALE

IEP's Ba3 CFR reflects the risks associated with its activist investment strategy, market value based leverage and low interest coverage due to the limited dividend capacity at most of its subsidiaries. IEP's succession planning also remains an important rating consideration due to the dominant leadership of its founder and 92% shareholder, Carl Icahn.

The wide range in the company's financial position, sometimes over a short period, highlights the opportunistic nature of IEP's business. Recent dispositions have provided significant gains, more than ample liquidity and positioned IEP's market value-based leverage (MVL) to just under 30% which is consistent with that of Baa-rated peers as of 31 March. However, for the prior year period MVL was closer to 40% and cash at the holding company stood at about $200 million compared to $2.0 billion today. Significant commitments of capital needed to fund deals or hedging programs within the company's Investment Funds segment limit our visibility into the ultimate risks for creditors.

The stable outlook on IEP's ratings reflects our belief that the company will continue to be opportunistic in deploying capital to pursue its activist agenda. As such, cash flows (mostly from its energy and real estate segments) as well as the ample liquidity available to it from its Investment Funds will be sufficient to service its debt.

The following criteria could lead to a rating upgrade: 1) More transparency and structure on management of leverage or adoption of more conservative financial policies; 2) sustained reduction in MVL below 30%; 2) a shift in the investment portfolio towards less concentrated positions of higher credit quality; 3) more stable cash flow dynamics generated by each of the subsidiaries; and 4) actions taken to address corporate governance issues relating to succession planning, group complexity, and transparency.

Conversely, the following criteria could result in a downgrade: 1) deterioration in valuations or credit strength of the operating subsidiaries or Investment Funds; 2) significant increase in net debt or decline in liquidity of the holding company or in the Investment Funds; 3) a key-man issue that threatens IEP's performance.

The principal methodology used in these ratings was Investment Holding Companies and Conglomerates published in July 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

IEP is a publicly traded master limited partnership that pursues an activist investment strategy to grow its investment management business and opportunistically enhance the value of operating segments with the ultimate goal of achieving high returns on invested capital. Operating segments include: Automotive, Energy, Food Packaging, Home Fashion, Metals, Mining, and Real Estate. At 31 March the company had total assets of approximately $23.8 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Rokhaya Cisse, CFA
AVP - Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Marc R. Pinto, CFA
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

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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