OREANDA-NEWS. S&P Global Ratings said today it lowered its corporate credit rating on Houston-based Plains All American Pipeline L. P. to 'BBB-' from 'BBB'. The outlook is stable. At the same time, we lowered our short-term rating on the partnership to 'A-3' from 'A-2'. In addition, we lowered our issue-level rating on the partnership's senior unsecured debt to 'BBB-' from 'BBB' and our short-term rating on its commercial paper to 'A-3' from 'A-2'. As of June 30, 2016, Plains had about $10.8 billion of balance-sheet debt.

"The stable outlook reflects our view that Plains will achieve total debt to EBITDA of about 5x and long-term debt to EBITDA to about 4.5x by year-end 2017, mainly from incremental EBITDA from organic growth projects and initiatives to reduce debt, which may include equity raises, joint ventures, and noncore asset sales," said S&P Global Ratings credit analyst Michael Grande.

We could lower the rating if adjusted total debt to EBITDA exceeds 5x by year-end 2017 and distribution coverage falls below 1x. This could occur if demand for crude oil remains weak, resulting in narrow crude differentials, increased competition, or Plains is unable to repair its balance sheet through the various financial levers at its disposal.

Although unlikely in the next 24 months, we could raise the rating if we are confident in the partnership's ability to maintain total adjusted financial leverage below 4.5x and long-term debt to EBITDA below 4x, and if we expect the partnership can fund its growth objectives in a manner that will strengthen the balance sheet. We would also expect Plains' base transportation and facilities businesses to remain resilient despite difficult industry conditions and intense competition.