Investing.com -- Moody’s Ratings has upgraded the outlook for Genesis Energy (NYSE: GEL ), L.P. from stable to positive, while affirming its B2 Corporate Family Rating (CFR), B2-PD Probability of Default Rating (PDR), and B3 ratings on existing senior unsecured notes.
This decision follows the recent divestiture of Genesis Energy’s soda ash business, which was sold for an implied enterprise value of $1.425 billion. Genesis Energy plans to use the majority of the $1.0 billion cash proceeds to pay off outstanding debt and preferred shares, which will significantly decrease the company’s financial leverage.
Moody’s Vice President, Thomas Le Guay, stated that the positive outlook reflects Genesis Energy’s improved financial position after the soda ash business divestiture. He also noted that the company’s financial profile is likely to continue improving gradually as earnings from its expanded offshore transportation business begin to increase in the second quarter of 2025.
The sale of the soda ash business will immediately reduce the leverage to approximately 6.2x debt/EBITDA, down from 6.7x as of December 31, 2024. Moody’s anticipates that Genesis Energy will continue to decrease its leverage, aiming to keep it below 5.0x throughout 2025 and into 2026.
Genesis Energy, which operates in offshore pipeline transportation, marine transportation, sulfur services and onshore facilities & transportation sectors, is expected to benefit from higher earnings from its expanded offshore transportation business from the second quarter of 2025. This is due to the completion of new offshore wells that will increase throughput volumes, and the continued strong performance of its marine transportation business.
Despite the positive outlook, Genesis Energy’s CFR is still limited by the company’s high level of financial leverage. However, this is expected to gradually decrease following the divestiture. Recovery is expected in the company’s offshore pipeline transportation segment in 2025, following a series of operational issues in the latter half of 2024.
The SGL-3 Speculative Grade Liquidity Rating reflects the expectation that Genesis Energy will have adequate liquidity over the next 12 to 18 months. This is supported by cash flow from operations and full availability under its $800 million revolving credit facility following the divestiture. The credit facility, which matures in September 2028, has received temporary covenant waivers that will remain in effect until December 31, 2026.
The ratings could be upgraded if Genesis Energy exhibits steady earnings growth and Debt to EBITDA is sustained at or below 5.0x. Conversely, the ratings could be downgraded if Genesis Energy’s core business fundamentals deteriorate, or the company does not execute on growth projects, or Debt to EBITDA does not decline below 6.0x on a sustained basis.
Genesis Energy, L.P., headquartered in Houston, Texas, is a master limited partnership (MLP) with midstream assets located in the US Gulf Coast region. The company operates through four different business segments: offshore pipeline transportation, sulfur services, onshore facilities & transportation, and marine transportation.
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