New York, June 16, 2020 --
Moody's Investors Service, ("Moody's") assigned
a Ba3 rating to EQM Midstream Partners, LP's (EQM) proposed
new senior unsecured notes due 2025 and senior unsecured notes due 2027.
The new notes are being offered to repay a portion of the outstanding
balance under the revolving credit facility maturing in October 2023.
All other ratings for the company, including its Ba3 Corporate Family
Rating (CFR), remain unchanged. The outlook remains negative.
Assignments:
..Issuer: EQM Midstream Partners, LP
....Senior Unsecured Notes, Assigned
Ba3 (LGD4)
RATINGS RATIONALE
EQM intends to use the net proceeds of the new notes issuance to repay
a portion of the outstanding balance under the revolving credit facility.
Moody's views this transaction as credit neutral as the overall debt burden
of the company remains mostly unchanged.
In addition to the new notes issuance, EQM has a $3 billion
revolving credit facility due 2023, $1.4 billion of
term loan due 2022 and $3.5 billion of senior unsecured
notes with staggered maturities, as of March 31, 2020.
EQM's revolver, term loan, existing senior unsecured notes
and the new senior unsecured notes are all unsecured and are pari passu.
Accordingly, the existing senior unsecured notes and the new unsecured
notes are rated Ba3, the same as the CFR.
EQM's Ba3 CFR is constrained by its reliance on EQT Corporation
(EQT, Ba3 negative) as its anchor shipper and primary customer.
With about 70% of EQM's 2019 revenues derived from EQT,
EQM's credit profile is closely tied to that of EQT. Furthermore,
EQM's update on Mountain Valley Pipeline (MVP) project's completion
timeline and budget, point to a slight delay in EQM's receipt
of critical MVP cash flow meant to materially ease EQM's debt leverage,
and potentially increased funding for EQM's share of the project
resulting in some incremental debt at EQM. In addition to higher
cost and cash flow delay, it also demonstrates yet another sign
of the difficulties that new pipeline developments have recently faced,
even in the post-permitting construction phase. Notwithstanding
the recent regulatory hurdles, the U.S. Supreme Court's
decision to overturn a lower-court ruling vis-à-vis
the U.S. Forest Service's authority to grant a special-use
permit for the construction of Atlantic Coast Pipeline, is a positive
development for MVP and its prospects for obtaining the final regulatory
approvals to complete the pipeline.
EQM supported by its close proximity to high production volumes in the
Marcellus Shale and the critical nature of its pipelines for moving natural
gas within the region to long haul pipelines. Contract renegotiations
with EQT have provided EQM with a new 15-year gas gathering agreement
with longer-term and higher minimum volume commitments and will
enhance EQM's long-term cash flow profile.
EQM's negative outlook follows EQT's negative outlook and
the risks of continued delays and budget increases at MVP.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
EQM's ratings could be downgraded if EQT is downgraded or if EQM's
debt to EBITDA increases substantially.
An upgrade of EQM is unlikely given EQT's negative outlook.
EQM's ratings could be considered for an upgrade if EQT is upgraded.
EQM must also maintain its existing stand-alone credit profile
with Debt/EBITDA reduced to below 5x.
The principal methodology used in these ratings was Midstream Energy published
in December 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147839.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
EQM Midstream Partners, LP is a master limited partnership that
owns and operates interstate pipelines and gathering lines primarily serving
Marcellus Shale production.
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 at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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 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.
The ratings have been disclosed to the rated entity or its designated
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These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
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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://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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 www.moodys.com.
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.
Sreedhar Kona
Vice President - Senior Analyst
Corporate Finance 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
Steven Wood
MD - Corporate Finance
Corporate Finance Group
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
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