Fitch cuts Plains All American, debt to BBB-

Fitch Ratings said it downgraded Plains All American Pipeline, LP's (PAA) long-term issuer default rating and senior unsecured rating to BBB- from BBB, and short-term issuer default rating and commercial paper ratings to F3 from F2.

The outlook remains negative.

Fitch said the downgrades reflect its expectation that Plains All American’s leverage will not improve to 4.5 times or below on a sustained basis (at least through 2019), given the weakness in its supply and logistics business.

The agency now expects leverage (debt/adjusted EBITDA – inclusive of 50% equity credit for $1.5 billion+ of preferred equity) sustainably over 4.5 times through 2018, in Fitch's base case scenario.

“The increase in leverage, versus prior expectations is being driven by an underperformance in PAA's Supply and Logistics segment which management has guided to a $100 million-$300 million EBITDA contribution for 2018, below Fitch's prior expectations,” the agency said in a news release.

“PAA has faced a much more challenging and competitive environment for its supply and logistics business than previously anticipated, by management or by Fitch.

“With the underperformance at supply and logistics expected for the foreseeable future Fitch now expects leverage in the 4.5x to 5.0x range for 2018 and at roughly 4.5x in 2019 above prior expectations and negative ratings sensitivities based on Fitch's assumptions and base case projections.”

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