NEW YORK (Standard & Poor's) Dec. 7, 2011--Standard & Poor's Ratings Services said today that it raised its issue ratings on Western Refining Inc.'s (Western's) senior secured debt to 'B+' from 'B' and revised the recovery ratings on this debt to '2', indicating our expectation for substantial recovery (70% to 90%) in the event of a payment default, from '3'.
The rating action reflects Western's planned redemption of its $275 million senior secured floating rate notes and the resulting improved recovery prospects for senior secured lenders due to a reduction in debt outstanding. The action also incorporates the divestiture of its Yorktown, Va. facility and crude oil pipeline in southeast New Mexico, which Western agreed to sell for $220 million.
For the complete recovery analysis, see Standard & Poor's recovery report on Western to be published on RatingsDirect, following the release of this report.
The rating on El Paso, Texas-based Western Refining (Western) reflects the company's exposure to the cyclical and capital-intensive refining industry, volatile operating margins, and a high degree of operating leverage. Ratings also reflect its adequate liquidity, decent proceeds from the sale of its Yorktown facility, and the company's plans to pay down a portion of its borrowings.
Very good news. Borrowing money will be less expensive, that's an improvement. The B++ rating is what WNR was shooting for in their debt reduction push. They felt they could obtain that rating if they got the debt down to $500-$600 million. Good for them!