OREANDA-NEWS. Fitch Ratings has affirmed LOOP LLC's ratings as follows:

--Long-Term Issuer Default Rating (IDR) at 'BBB+';

--First-stage deepwater port revenue bonds and refunding revenue bonds (first-stage debt) at 'A-';

--Deepwater port refunding revenue bonds (unsecured debt) at 'BBB+';

--Senior unsecured debt at 'BBB+';

--Short-Term IDR at 'F2'.

The Rating Outlook is revised to Positive from Stable.

Approximately $243 million of first-stage debt and $143 million of unsecured debt is affected by this rating action.


The ratings are supported by LOOP's strategic position as the only deep-water port in the U. S. capable of offloading ultra-large crude carriers and very large crude carriers that are too large to access inland port facilities. It is also well positioned to receive domestic crudes delivered by medium range tankers and pipelines. Crude oil storage has also been an increased focus and new expansions should modestly benefit EBITDA. The ratings are further supported by expectations that LOOP's owners will continue to demonstrate support with financial flexibility for distributions. LOOP's owners are U. S. subsidiaries of Royal Dutch Shell plc (46.1%; IDR 'AA', Rating Watch Negative), affiliates of Marathon Petroleum Corp. (50.7%; IDR 'BBB', Stable Outlook), and affiliates of Valero Corp. (3.2%; IDR 'BBB', Stable Outlook).

In 2015, LOOP recorded higher total revenue and EBITDA, up 9.3% and 3.5% year-over-year (y-o-y), driven by greater throughput and storage volumes. Total throughput revenue and volumes are up 15% and 13% y-o-y, respectively. The company has assets well positioned to handle domestic crudes arriving by medium range tankers and by pipelines. Previously, a decrease in foreign import volume, partially driven by greater U. S. crude production due to shale revolution, has been a concern for LOOP's operation and credit profile. However, in recent years LOOP has shown success in generating greater cash flow from domestic throughput and storage services. Its major storage facility at Clovelly Hub is well positioned to handle domestic crudes by major pipeline such as the Mars Oil Pipeline System (MOPL), Endymion Pipeline Company, and the Zydeco Ho-Ho System. Those volumes have increased over the last few years, and Fitch expects domestic volumes to continue to rise modestly in future periods. Furthermore, LOOP should benefit from better results from existing crude storage assets as well as current storage expansion project, in which all the newly built tanks are expected to come in service by 2017.

Rating concerns include the impact of volatility of foreign import and domestic throughput volumes. Foreign crude imports are largely impacted by macroeconomics and have decreased over the years. The loss in volume in recent years, as mentioned, has been greatly offset by the increase in domestic throughput from channels such as MOPL, Endymion Pipeline, and Zydeco Ho-Ho pipeline. However, should a slowdown in refinery production in Gulf of Mexico occurs, it could lead to lower domestic volumes and negatively affect LOOP's revenue and cash flow.

Fitch is also concerned about the potential for the Capline pipeline to reverse its flows. Capline currently moves crude north from Louisiana to Illinois. Owners of Capline have contemplated moving Canadian crude south to refiners in the Gulf Coast for some time and it is unknown if a reversal would occur. If it does, it could impact volumes for LOOP. Capline is an underutilized crude pipeline with capacity of 1.2 million barrels per day.

First-Stage Debt

The 'A-' rating for the first-stage debt reflects the benefits stemming from the right these bondholders have to receive payments under throughput and deficiency (T&D) agreements with LOOP's owners. The T&D obligors are required to ship or cause to be shipped enough oil to enable LOOP to meet its operating expenses and debt service on all first-stage debt according to their pro-rata share of ownership. Alternatively, the owners severally agree to make cash payments to LOOP for any deficiency in meeting these obligations in exchange for a credit for future throughput. In addition, a portion of the first-stage debt is backed by irrevocable letters of credit which provides additional credit enhancement to specific tranches.

Unsecured Debt

While LOOP's 'BBB+' unsecured debt ranks pari passu with first-stage debt, it does not share in the additional credit enhancement provided by the T&D agreements. However, Fitch expects that throughput volumes from non-owner shippers will continue to provide sufficient cash flow to support LOOP's non-T&D backed debt. In 2015, third party volumes accounted for 21% of import throughputs. Import throughputs accounted for 56% of LOOP's overall throughput.

Improving Leverage Metrics

Leverage, as defined as debt/operating EBITDA, for the latest 12 months (LTM) ending June 30, 2016 was 3.0x, down from 3.3x at year-end of 2015. The decrease is attributed to greater growth in EBITDA while debt modestly decreased. Importantly, LOOP's leverage has improved significantly since year-end 2013 when it was 5.4x as a result of weak EBITDA. Fitch does not expect leverage to return such high levels. Fitch expects LOOP's leverage level to be 2.8x-3.3x for 2016 and at 3.0x or below going forward.


--Foreign imported volumes remain stable at similar level of the past two years. Storage and domestic volume from waterborne or pipeline receipts is forecasted to rise at a steady pace.

--EBITDA margins in the forecast period of 2015 to 2018 are forecasted to be between 43% and 48%, accounting additional revenue and EBITDA from newly built storage tanks.

--Dividends to owners are expected to fluctuate based on LOOP's cash flows. Fitch assumes that past dividend yield and flexibility will continue.

--Capex is expected to be high in 2016, including the construction cost of the existing storage tanks expansion project. Fitch assumes spending will normalize to approximately $20 million-$40 million in the later periods.

--Leverage is projected to be in the range of 2.8x-3.3x at the end of 2016. Fitch expects leverage to be at 3.0x or below beyond 2016 driven by greater growth in EBITDA and existing debt repayment plan.

--No assumptions are made for Capline potentially reversing crude flows to the north.


Positive: Future developments that may, individually or collectively, lead to positive rating action include:

--Significant leverage reduction along with stable throughput volumes. Should leverage fall to 2.5x-3.0x in 2017 and be expected to remain at these levels on a sustained basis, Fitch would likely upgrade LOOP's Long-Term IDR to 'A-'.

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

--Deterioration in the underlying credit quality of LOOP's T&D obligors or unfavorable revisions in T&D support agreements;

--A shift in crude transportation dynamics which permanently reduces throughput volumes;

--Increased leverage of 3.0x-4.0x on a sustained basis can lead to a Stable Outlook;

--Leverage beyond 4.0x on an ongoing basis could result in a negative ratings action.


As of June 30, 2016, LOOP had $27 million of cash on the balance sheet. In addition it has a $50 million revolver which extends until December 2017. There are no debt maturities until $24.7 million of T&D bonds come due in September 2017. LOOP has the ability to remarket these notes. Fitch notes that the dividend payable to LOOP's owners is discretionary and enhances the company's liquidity.


Fitch has affirmed the following ratings:


--Long-Term Issuer Default Rating (IDR) at 'BBB+';

--First-stage deepwater port revenue bonds and refunding revenue bonds (first-stage debt) at 'A-';

--Deepwater port refunding revenue bonds (unsecured debt) at 'BBB+';

--Senior unsecured debt at 'BBB+';

--Short-Term IDR at 'F2';

The Outlook is revised to Positive from Stable.