Icahn Enterprises Outlook Revised To Negative On Rise In Leverage Because Of Market Volatility; 'BB+' Ratings Affirmed

  • Meaningful volatility in oil and equity markets had a significant negative impact on Icahn's portfolio.
  • We anticipate that the loan-to-value (LTV) ratio is now close to 45%, our downside trigger for Icahn.
  • We are revising our outlook on Icahn to negative from stable and affirming our 'BB+' issuer credit and senior unsecured debt ratings.
  • The negative outlook reflects our expectation that the company could sustain an LTV ratio above 45% during the next 12 months absent any significant uptick in equity and oil markets.
NEW YORK (S&P Global Ratings) March 25, 2020--S&P Global Ratings said today it revised its outlook on Icahn Enterprises L.P. to negative from stable. At the same time, we affirmed our 'BB+' issuer credit and senior unsecured debt ratings. The recovery rating on the debt issues remains '3', indicating our expectation for meaningful (65%) recovery in the event of a default.
We anticipate that Icahn's portfolio value deteriorated meaningfully during the first quarter of 2020 amid increased volatility in oil and equity markets.
CVR Energy, one of Icahn's largest positions, is trading at approximately a 60% discount relative to the value at the beginning of the year following a significantly decline in oil prices. On the other hand, the investment unit, one of the most sizable segments in the portfolio, could exhibit some degree of volatility given fluctuations in equity markets. These two segments represented about 69% of the portfolio as of Dec. 31, 2019.
While estimating the fair value of other non-listed investments in the portfolio might be more challenging, we believe that the company's loan-to-value (LTV) ratio could have approached or modestly surpassed 45%, our downside trigger for the company. We intend to monitor fluctuations in oil and equity markets during the next 12 months and assess the corresponding impact on the LTV ratio.
The negative outlook reflects our expectation that the company could sustain an LTV ratio above 45% during the next 12 months absent any significant uptick in equity and oil markets.
We could lower the ratings if the company operates with an LTV ratio above 45% for a sustained period of time. Alternatively, we could lower the ratings if the portfolio becomes more concentrated, asset quality deteriorates, or the liquidity of the portfolio diminishes.

We view an upgrade over the next 12 months as unlikely. That said, we could revise the outlook to stable if the LTV ratio declines comfortably below 45% for a sustained period of time while the portfolio's diversity, liquidity, and asset quality do not deteriorate.
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