S&P: Sweetwater Investors II LLC Rating Outlook Revised To Stable From Negative; 'BBB' Rating Affirmed
"The rating action on Sweetwater follows the rating action on Anadarko," said S&P Global credit analyst Mike Llanos. "We revised our outlook on Anadarko to stable from negative following the company's agreement to acquire deepwater Gulf of Mexico assets from mining company Freeport-McMoRan Inc. for $2 billion." The transaction will be funded largely with equity and will result in improved credit metrics in 2017 and 2018.
The stable outlook reflects our view that the project will have sufficient liquidity through the life of the transaction and that debt service coverage ratios will average about 1.65x as a result of stable trona volumes.
A sustained fall in trona prices and coal volumes below forecast levels could lead to lower ratings, such that our projected minimum debt service coverage ratio falls below 1.5x. We could also lower the ratings if we lower our rating on Anadarko, as we believe Headwater II exhibits creditworthiness similar to Anadarko, given its reliance on royalties from indirect wholly owned subsidiaries of Anadarko.
Higher ratings are unlikely as our rating on Anadarko serves as a rating ceiling to the transaction.