CSI Compressco L.P. 'B-' Rating Affirmed On EBITDA Growth And Improved Leverage; Outlook Stable


  • CSI Compressco L.P.'s run rate EBITDA improvement and its short-term dividend cut, which is being used to repay its series A preferred shares, has led us to revise our forecast. We are now projecting leverage to decline more quickly over the next two years.
  • However, we expect the partnership's capital structure to remain highly leveraged over the next 12–18 months while utilization and scale of operations continue to lag behind the peer group.
  • We are affirming our 'B-' issuer credit rating on CSI Compressco. We are also affirming the senior secured 'B+' rating, with a '1' recovery rating. At the same time, we are affirming the 'CCC+' senior unsecured rating, with a '5' recovery rating.
  • The stable outlook reflects our expectation that S&P Global Ratings-adjusted debt to EBITDA will remain over 5x while utilization averages about 87% for the next 12-18 months.
NEW YORK (S&P Global Ratings) April 4, 2019--S&P Global Ratings today took the 
rating actions listed above. CSI Compressco L.P.'s quarter-over-quarter EBITDA 
growth in 2018 and recent short-term dividend cut to fund a repayment of its 
series A preferred shares have incrementally improved our expectations for 
leverage over the next two years. We now expect leverage to trend down faster 
than our previous expectations. At the same time, we still expect S&P Global 
Ratings-adjusted debt to EBITDA to remain over 5x over the next 12–18 months. 
The partnership's small scale and lower utilization than rated peers Archrock 
Partners LP ('B+/Stable/--') and USA Compression Partners LP ('B+/Stable/--') 
offsets the incremental improvement in our leverage forecast. As a result, we 
are affirming our 'B-' issuer credit rating.

Our stable outlook reflects our expectation that CSI will maintain adequate 
liquidity over the next few years as it increases incrementally in scale, 
while utilization averages about 87%. We expect the partnership's adjusted 
debt to EBITDA to remain above 5x over the next 12–18 months, although we 
expect it to trend lower over time.

We could lower the rating if we viewed the partnership's capital structure as 
unsustainable or if we viewed liquidity as less than adequate. This could 
occur if industry conditions significantly weakened.

We could raise the rating if the partnership can maintain debt to EBITDA below 
5x on a sustained basis, while maintaining adequate liquidity, growing in 
scale, and improving its utilization to the 90% area. This could occur if 
industry conditions improve, resulting in greater demand for the partnership's 
equipment.
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