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Rating Action:

Moody's changes PBF's outlook to positive

24 Jan 2019

NOTE: On January 25, 2019, the press release was corrected as follows: In the debt list, under affirmations for PBF Holding Company LLC, the reference to senior secured notes was removed. Revised release follows.

New York, January 24, 2019 -- Moody's Investors Service ("Moody's") changed PBF Holding Company LLC's (PBF) outlook to positive from stable. Moody's also affirmed its Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating and SGL-3 short term liquidity rating.

At the same time, Moody's affirmed PBF Logistics LP's (PBFX) B1 CFR, B1-PD Probability of Default Rating and SGL-2 short term liquidity rating. PBFX's outlook remains stable.

Affirmations:

..Issuer: PBF Holding Company LLC

.... Probability of Default Rating, Affirmed Ba3-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-3

.... Corporate Family Rating, Affirmed Ba3

....Senior Unsecured Notes, Affirmed B1 (LGD5)

..Issuer: PBF Logistics LP

.... Probability of Default Rating, Affirmed B1-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-2

.... Corporate Family Rating, Affirmed B1

....Senior Unsecured Notes, Affirmed B2 (LGD5)

Outlook Actions:

..Issuer: PBF Holding Company LLC

....Outlook, Changed To Positive From Stable

..Issuer: PBF Logistics LP

....Outlook, Remains Stable

RATINGS RATIONALE

The change of PBF's rating outlook to positive reflects expected on-going improvement in the company's operating performance, backed by investment to improve the reliability of assets, that should lead to improved cash flow generation.

PBF manages an elevated debt level accumulated as a result of acquisitions. Shareholder distributions, together with sizable working capital movements driven by volatile oil prices, as well as sizable capital spending, will limit debt reduction opportunities in the near term. Moody's therefore expects deleveraging to be driven by organic improvement in operating cash flows. The Ba3 CFR is supported by the significant size of its operations and relatively high complexity of PBF's refineries.

PBF's ratings may be upgraded if the company demonstrates improved profitability and cash flow generation and balanced distributions to shareholders, such that it is able to maintain a consistently neutral FCF position and RCF/debt above 25%.

Weaker operating performance or increased distributions to shareholders, leading to RCF/debt declining below 15%, as well as weaker liquidity, including as a result of larger working capital outflows or one-off events, such as a termination of the inventory intermediation agreements, may lead to the downgrade of PBF's Ba3 ratings.

PBF maintains adequate liquidity reflected in its SGL-3 short term liquidity rating. This assessment is materially supported by the expectation that the company will continue to have good access to credit from its trading partners. As with any refining business, PBF relies on external liquidity sources to fund its sizable working capital requirements. PBF needs to finance a significant inventory of crude oil, intermediaries and refined products. We expect PBF's working capital requirements will rise in 2019, as the company plans to implement three turnaround programs.

As of September 2018, PBF reported $1 billion in balance sheet cash and had $2.2 billion available under its ABL facility. The revolver due May 2023 has a total commitment of $3.4 billion, but the borrowing base was estimated by the company to be around $3.2 billion at the end of september 2018, which is the amount that governs the maximum utilization of the facility. The ABL credit facility has a single financial maintenance covenant, a minimum fixed charge coverage ratio of 1x, applicable only when availability drops under certain levels.

PBF and its two refining subsidiaries Delaware City Refining and Paulsboro Refining, also use two inventory intermediation facilities with J.Aron. The facilities mature in the second half of 2019 and the company has an option to extend the maturity to 2020. Under the terms of the facility, J.Aron purchases hydrocarbon inventory from PBF and its refining subsidiaries. When PBF sells the inventory, J.Aron sells it back to the refineries. At the end of September 2018, PBF reported that the value of inventory funded by the facilities stood at $339 million. The facilities help PBF to fund working capital requirements of the two refineries representing around 40% of the company's capacity. However, it can also create a sizable cash call if PBF is required to purchase all the inventory from J.Aron or replace this financing facility upon a termination.

PBF Logistics is strategically and operationally important to PBF Energy Company LLC (PBF Energy, unrated), as the master limited partnership (MLP) provides PBF with critical infrastructure and a coordinated growth strategy.

On a standalone basis, PBFX's credit profile is more consistent with a B2 CFR, with stable cash flows 93% covered by long-term, fee-based contracts with minimum volume commitments, and a solid growth trajectory underpinned by PBF. PBFX is restrained by its small scale of operations with limited third-party revenues, short track record as an MLP, and high distributions associated with its MLP structure. Absent new acquisitions, we expect PBFX to maintain a solid leverage profile and good EBITDA growth momentum in 2019, with debt/EBITDA less than 4x and a distribution coverage ratio of 1.4x.

The stable outlook on PBFX's ratings reflects the expectation the company will continue to grow and will maintain its solid leverage profile.

An upgrade of PBFX's rating will require the company to increase its size and scale, with EBITDA exceeding $200 million and Net Assets (Property, Plant & Equipment) exceeding $500 million on a sustained basis, and to maintain solid leverage profile with debt/EBITDA below 4x and coverage in excess of 1.1x, as well as good liquidity.

PBFX's ratings may be downgraded if the company pursues significant acquisitions or shareholder distributions, funded by debt leading to increase in leverage, with debt / EBITDA above 5x. A downgrade of PBF's ratings could pressure PBFX's ratings.

PBFX's SGL-2 liquidity rating reflects our expectation of good liquidity. The liquidity profile is hampered by its high distribution payouts under the MLP structure.

As of September 30, 2018, PBFX had $18 million in cash and $445 million of availability under its $500 million revolving credit facility. The revolving credit facility matures in July 2023 and is secured by substantially all of PBFX's assets and includes covenants of maximum total leverage of 4.5x, maximum secured leverage of 3.5x and minimum interest coverage of 2.5x. We project the company will be in compliance with these covenants for the next 12 months. Funding of future drop-downs will require equity and debt capital market access to ensure covenant compliance. We believe that the company will need to continue financing its acquisitions with a commensurate portion of equity.

The principal methodology used in rating PBF Logistics LP was Midstream Energy published in December 2018. The principal methodology used in rating PBF Holding Company LLC was Refining and Marketing Industry published in November 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

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.

Elena Nadtotchi
VP - Senior Credit Officer
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.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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