Ratings On Macquarie Infrastructure Corp. And Subsidiary ITT Holdings LLC Lowered To 'BB+' On Weak Performance


  • S&P Global Ratings lowered our issuer credit rating on Macquarie Infrastructure Corp. (MIC) and subsidiary ITT Holdings LLC (IMTT), which we now rate on a consolidated basis, to 'BB+' from 'BBB-'.
  • The rating action reflects an EBITDA decline at IMTT and a less diverse cash flow at MIC following the completed sale of Bayonne Energy Center (BEC) and the anticipated sale of its renewables business. As a result, MIC is now rated under S&P Global Ratings corporate methodology.
  • At the same time, we lowered our issue-level ratings to 'BB+' from 'BBB-' and assigned a '3' recovery rating on MIC and IMTT's senior unsecured debt.
  • While IMTT's stand-alone credit profile (SACP) remains at 'BBB-', in the absence of legal or structural insulation, its corporate ratings reflect the consolidated credit profile of parent MIC, as per our group rating methodology.
  • We view MIC's consolidated financial risk profile as aggressive, as shown by an adjusted debt-to-EBITDA metric exceeding 4.5x, and a funds from operations (FFO)-to-debt measure of less than 15%.
  • We expect MIC's adjusted debt-to-EBITDA to stay within the 4.75x-5.0x range in 2019, and that the ratings outlook will remain stable.
NEW YORK (S&P Global Ratings) March 15, 2019--S&P Global Ratings today took 
the rating actions listed above. Our rating action affects nearly $750 million 
(outstanding) of senior convertible notes due 2019 and 2023 at MIC. We 
estimate about $25 million are currently drawn, or posted, on a $600 million 
unrated senior secured revolver facility. 

The stable outlook reflects our view that MIC's consolidated financial profile 
will reflect debt to EBITDA of less than 5.0x, and adjusted FFO to debt of 
about 14%. The outlook factors MIC's ability to extend debt maturities at all 
its operating subsidiaries, but also considers that utilization rates at IMTT 
will need to improve to historical levels without a significant decline in 
average tariffs. While we think there is uncertainty surrounding IMTT's 
ability to regain lost utilization levels, that risk is balanced by 
management's decision to deleverage IMTT as it executes its repurposing.

IMTT's stand-alone credit profile is predicated on execution risks that 
include its ability to repurpose tanks to cleaner products in a timely manner, 
its ability to renew repurposed or expiring contracts, and eventually 
increasing utilization rates. We expect the company to maintain adjusted debt 
to EBITDA in the 4.2x-4.4x range and FFO to debt in the 17%-20% range. 
Important to this financial performance is IMTT's ability to improve 
utilization above 90%.

We could lower the rating if MIC's underlying businesses continue to 
underperform, especially if consolidated adjusted debt to- EBITDA exceeds 5.0x 
on a sustained basis, or if FFO to debt falls to less than 12%. This could 
happen if utilization rates at IMTT continue to remain lower than 85%, if IMTT 
is unable to repurpose tanks to cleaner products in the time it expects, and 
whether the company can secure customers for repurposed tankage and/or 
expiring contracts. Also, Atlantic Aviation is particularly susceptible to 
decreasing EBITDA when the U.S. economy contracts.  

Higher ratings are unlikely in the near term, but we could revise the outlook 
to positive, and higher ratings could follow, if MIC diversifies its asset 
base via conservatively financed acquisitions that would generate stable cash 
flow, lower its exposure to its investments IMTT and Atlantic Aviation FBO 
Inc., and improved consolidated leverage to less than 4.25x
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