S&P downgrades NuStar Energy

S&P said it lowered the issuer credit rating on NuStar Energy LP to BB- from BB.

The agency also said it lowered the rating on the partnership's senior unsecured debt to BB- from BB, along with the rating on its subordinated notes to B from B+.

The 3 recovery rating on the senior unsecured debt and 6 recovery rating on the subordinated notes are unchanged.

S&P also said it lowered the rating on NuStar's series A, B, and C perpetual preferred securities to B- from B.

The partnership's capital spending program continues to require it to borrow, which will pressure its leverage metrics through the forecast period, S&P said.

The stable outlook reflects a view that NuStar's elevated leverage of 6.9x in 2019 will decline in 2020 as the project's growth projects come online and its capital spending slows, the agency said.

While the additional EBITDA from the growth projects would reduce the partnership's leverage metric, this is partly offset by the execution risk inherent in the projects, S&P said.

Challenges in NuStar's storage segment also have pressured its leverage metrics, specifically the reduced cash flows attributed to its St. Eustatius terminal, the agency noted.

NuStar has taken a number of positive credit actions over the past 18 months, but they have been insufficient to reduce its leverage below the target range to maintain a BB rating, Moody's said.

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