Moody's upgrades Tesoro Logistics

Moody's Investors Service said it upgraded Tesoro Logistics LP's corporate family rating to Ba2 from Ba3, its probability of default rating to Ba2-PD from Ba3-PD and its $550 million senior notes due 2021 and $600 million senior notes due in 2020 to Ba3 (LGD4) from B1 (LGD 4). The speculative grade liquidity rating was affirmed at SGL-3, and the outlook is stable.

The agency said the upgrade reflects the company’s increased scale and asset diversity, with a continued high percentage of contracted, fee-based revenues from its parent company and general partner, Tesoro Corp.

On a standalone basis, Moody's views Tesoro Logistics' credit profile as more consistent with a Ba3 rating, reflecting its stable cash flows from long-term, fee-based contracts with minimum volume commitments and visible growth trajectory, but restrained by its limited track record as both a master limited partnership and with its portfolio of assets, and aggressive growth strategy and high distributions associated with its MLP structure.

However, the Ba2 corporate family rating reflects uplift from its strategic importance to its general partner, Tesoro Corp., as the MLP will provide it with critical infrastructure and a coordinated growth strategy, and supportive contract structures, the agency said.

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