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Rating Action: Moody's upgrades Antero Midstream's CFR to B1
Global Credit Research - 11 Jan 2021
Approximately $2.5 billion of rated debt affected
New York, January 11, 2021 -- Moody's Investors Service, ("Moody's") upgraded Antero Midstream Partners LP's (AM) Corporate Family Rating (CFR) to B1 from B2, Probability of Default Rating (PDR) to B1-PD from B2-PD, and senior unsecured notes to B2 from B3. The Speculative Grade Liquidity rating was unchanged at SGL-3. The rating outlook remains stable.
"The upgrades reflect significant improvements in the credit profile of AM's principal customer Antero Resources Corporation (Antero Resources, B1 stable) that will bring stability in AM's operations and cash flow," said Sajjad Alam, Moody's Senior Analyst.
Issuer: Antero Midstream Partners LP
.... Corporate Family Rating, Upgraded to B1 from B2
.... Probability of Default Rating, Upgraded to B1-PD from B2-PD
.... Senior Unsecured Notes, Upgraded to B2 (LGD5) from B3 (LGD5)
Speculative Grade Liquidity Rating, Remains Unchanged at SGL-3
..Outlook Actions: ....Outlook, Remains Stable RATINGS RATIONALE
Antero Midstream's B1 CFR reflects its heavy reliance on Antero Resources, concentrated geographic focus in the Appalachian Basin, and indirect exposure to highly volatile natural gas and natural gas liquids (NGLs) prices. AM's primary counter-party Antero Resources is trying to operate with lower costs, generate free cash flow, reduce debt and push out significant debt maturities. Consequently, any material changes to Antero Resources' credit profile will likely have a direct impact on Antero Midstream's ratings. AM's CFR is supported by its substantial scale, moderate financial leverage, adequate distribution coverage and predominantly fee-based revenue stream from Antero Resources. Although AM continues to pay high distributions which will exceed operating cash flow in 2021, leverage metrics should remain manageable.
Antero Midstream's unsecured notes are rated B2, one notch below the B1 CFR given the significant size of the company's secured credit facility in the capital structure that has a priority claim to AM's assets.
The SGL-3 rating reflects Moody's view that AM will maintain adequate liquidity through 2021. Pro forma for the $550 million notes issuance in November 2020, AM had roughly $1.5 billion of availability under its $2.13 billion revolving credit facility as of September 30, 2020. The revolver expires on October 26, 2022, and Moody's expects AM to remain in compliance with the revolver financial covenants. The partnership has limited alternate liquidity given its assets are encumbered.
Antero Midstream's stable rating outlook is consistent with the rating outlook of Antero Resources.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of AM's ratings would depend on Antero Resources Corporation ratings being upgraded. Moody's would also expect debt/EBITDA to remain below 4x and distribution coverage to be sustained above 1.1x. The CFR could be downgraded if Antero Resources' CFR is downgraded, or if AM's leverage metric rises above 5x.
The principal methodology used in these ratings was Midstream Energy published in December 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147839. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Antero Midstream Partners LP is a wholly owned subsidiary of Antero Midstream Corporation, a midstream energy company based in Denver, Colorado. Antero Midstream Corporation owns and operates an integrated system of natural gas gathering pipelines, compression stations, processing and fractionation plants, and water handling and treatment assets in northwest West Virginia and southern Ohio.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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Sajjad Alam Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Steven Wood MD - Corporate Finance Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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