DBRS confirms Parkland on acquisition

DBRS said it confirmed the issuer rating and senior unsecured notes rating of Parkland Fuel Corp. at BB; the trends are stable.

The recovery rating on Parkland’s senior unsecured notes remains at RR4.

The confirmations follow the company’s announcement that it entered into an agreement with Alimentation Couche-Tard Inc. to acquire the majority of the Canadian business and assets of CST Brands, Inc. for about C$965 million (an EBITDA multiple of roughly 8.5 times).

Parkland intends to finance the acquisition with a combination of debt and equity, including a $200 million bought deal private placement equity offering (with a 15% over-allotment option, which if exercised would reduce the amount drawn on the revolver), C$545 million drawn on a new secured revolving credit facility (replacing Parkland’s existing revolver) and a C$300 million bridge credit facility (to be replaced with alternative longer-term debt prior to the closing of the transaction).

Couche-Tard previously announced a definitive merger agreement with CST under which they will acquire CST, subject to customary conditions, including approval by CST shareholders and receipt of regulatory approvals.

The acquisition is conditioned upon closing of the transaction between CST and Couche-Tard, among other conditions, including a Competition Bureau of Canada review and is expected to be completed in early 2017.

DBRS said the acquisition will benefit Parkland’s scale, adding roughly 3 billion liters of fuel annually (excluding the CST company-operated retail sites) increasing sites to nearly 1,600 and pro forma fuel volumes to 13.3 billion liters.

The acquisition also adds annual adjusted EBITDA of C$105 million to C$115 million before synergies, a 44% increase over Parkland’s adjusted EBITDA for the last 12 months ended June 30, the agency noted.

© 2015 Prospect News.
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