NOTE: On July 22, 2022, the press release was corrected as follows: The following was added as the fourth sentence of the first paragraph of the press release: “The loan matures on September 1, 2033.” Revised release follows.
New York, June 30, 2022 -- Moody's Investors Service has assigned an A2 rating to the State of Louisiana's approximately $94.2 million TIFIA Loan - Act 443 (I-49 South Project). The loan is an agreement between the US Department of Transportation and the Louisiana State Bond Commission and the Louisiana Department of Transportation and Development. Moody's maintains the A2 ratings on outstanding parity bonds. The loan matures on September 1, 2033. The outlook is stable.
RATINGS RATIONALE
The A2 rating is consistent with the rating of BP p.l.c. (A2, stable), the British oil extraction company and the parent of BP Exploration and Production, Inc. (BPXP, unrated), the US oil drilling entity that is providing the pledged payments under a settlement reached with Gulf Coast states after the 2010 explosion of the "Deepwater Horizon" oil rig. In view of guaranty agreements provided by BP Corporation North America, Inc. (BPCNAI, A3 stable) and by BP itself, the rating on the Act 443 TIFIA loan specifically reflects the credit standing of BP. These agreements provide irrevocable and unconditional guarantees that the payments from BPXP will be made on time and in full. The bonds' rating will likely remain linked to BP p.l.c., and we would not expect the rating to exceed that of the state of Louisiana (Aa2 stable).
RATING OUTLOOK
The outlook is consistent with BP's stable outlook, which is supported by the company's resilience due to efficiency and cash flow protection measures taken in 2020 and its stated commitment to maintain strong financial credit metrics. The outlook also reflects the expectation that BP's credit metrics will remain well in line with the requirements for the A2 rating and our assessment that at this point the company's strategy sufficiently mitigates the increasing challenge to its profitability and cash flow generation from the energy transition.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
- Upgrade of BP p.l.c. and affiliated entities
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
- Downgrade of BP p.l.c. and affiliated entities
- Downgrade of the state's rating to a level at or below BP's
- Changes in governing legal documents that are detrimental to bondholder interest
LEGAL SECURITY
The bonds are payable from and secured by the state's receipts of economic damage payments from BP Exploration and Production (BPXP) following the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. In connection with the settlement agreement, BP Corporation North America, BPXP's parent, provided a primary guaranty of the payments to the state, and BP p.l.c. provided a secondary guaranty. We view the secondary guaranty as senior unsecured obligations of BP p.l.c.
USE OF PROCEEDS
Proceeds of the loan will be used to provide partial funding for certain highway projects designated by the Louisiana legislature in Act 443.
PROFILE
Louisiana is the 25th-largest state by population, at 4.6 million. Its state gross domestic product is 26th largest. The state has below average wealth, with 2021 per-capita personal income equal to 86% of the US level and the among the highest poverty rates in the country.
METHODOLOGY
The principal methodology used in this rating was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017 and available at https://ratings.moodys.com/api/rmc-documents/75699. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 issuer/deal page for the respective issuer on https://ratings.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.
Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Marcia Van Wagner
Lead Analyst
State Ratings
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Timothy Blake
Additional Contact
State Ratings
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
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