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Rating Action:

Moody's places TransMontaigne's ratings under review for downgrade

07 Dec 2018

New York, December 07, 2018 -- Moody's Investors Service ("Moody's") placed the ratings of TransMontaigne Partners L.P. (TransMontaigne) under review for downgrade, including the Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating (PDR) and B2 rating on its senior unsecured notes. Moody's affirmed the company's SGL-3 Speculative Grade Liquidity Rating. The action follows the company's announcement that an affiliate of ArcLight Energy Partners Fund VI, L.P. has reached an agreement to purchase all the publicly held outstanding common units of TransMontaigne.

"The acquisition of TransMontaigne's outstanding units will be predominately funded by a new $525 million term loan, which will greatly increase the amount of debt to be serviced by TransMontaigne's cash flow," stated James Wilkins, Moody's Vice President -- Senior Analyst.

The following summarizes the ratings activity.

On Review for Downgrade:

..Issuer: TransMontaigne Partners L.P.

.... Corporate Family Rating, Ba3, review for downgrade

.... Probability of Default Rating, Ba3-PD, review for downgrade

.... Senior unsecured notes due 2026, B2 (LGD5), review for downgrade

Ratings affirmed:

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

Outlook Actions:

....Outlook, rating under review From Stable

RATINGS RATIONALE

Moody's will conclude the review following the closing of the acquisition, which is currently anticipated to be completed in the first quarter 2019. The transaction, which has been approved by the Conflicts Committee of the board of directors of TransMontaigne GP, L.L.C., the general partner of TransMontaigne, is subject to approval by holders of common units of TransMontaigne representing a majority of the outstanding common units. Moody's expects the CFR and rating on the notes to be downgraded at least one notch at the conclusion of the review, based on the announced terms of the transaction.

Moody's expects the existing debt at TransMontaigne to remain outstanding and the acquisition financing debt at a holding company above TransMontaigne will not be guaranteed by TransMontaigne and will be structurally subordinated to the existing TransMontaigne debt. The $525 million of transaction financing debt will increase the debt serviced by TransMontaigne's cash flows to $1.13 billion, about 7.5x the partnership's EBITDA, compared to TransMontaigne's actual leverage ratio of 4.6x as of September 30, 2018 (without considering pro forma adjustments for recent acquisitions and major capital projects). The interest coverage and distribution coverage metrics will also deteriorate with the added debt, even with an expected modest increase in EBITDA generation in 2019 from new projects.

The senior unsecured notes are rated two notches below the CFR, consistent with Moody's loss-given-default rating methodology, reflecting the priority claim of the secured revolving credit facility borrowings. The revolver borrowings are secured by a first priority security interest in the majority of the company's assets.

TransMontaigne's SGL-3 Speculative Grade Liquidity rating reflects Moody's expectations that the company will have adequate liquidity supported by positive cash flow from operations and unused borrowing capacity under its $850 million revolving credit facility due in March 2022. The company keeps minimal cash balances ($4 million as of September 30, 2018). TransMontaigne had approximately $558 million of revolver availability as of September 30, 2018, after accounting for $850 million of commitments, borrowings of $291 million and letters of credit (less than $1 million). The company's legacy business has generally had little variation in working capital levels on a seasonal basis. The credit facility has three financial maintenance covenants: (1) a maximum total leverage ratio of 5.25x; (2) a senior secured leverage ratio of 3.75x; and (3) a minimum interest coverage ratio of 2.75x, all of which the company should remain in compliance with. The company has no near-term debt maturities.

Following the completion of the acquisition, Moody's expects the rating outlook to be stable based on the expectation that earnings will improve modestly in 2019 and ongoing capital spending for growth projects will not meaningfully impact leverage metrics.

The principal methodology used in these ratings was Midstream Energy published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

TransMontaigne, headquartered in Denver, Colorado, is a midstream energy master limited partnership (MLP) with storage terminals and product pipeline assets in multiple regions across the US, including along the Gulf Coast, in the Midwest, in Houston and Brownsville, Texas, along the Mississippi and Ohio Rivers, in the Southeast and on the West Coast. TransMontaigne GP, the general partner (GP), is an indirect, controlled subsidiary of ArcLight Energy Partners Fund VI, LP.

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.

James Wilkins
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.
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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