Concerns include modest increase in LOCAP's leverage relative to previous forecast, driven by higher operating expense.
Under these agreements, the affiliates are obligated to ship, or cause to be shipped through LOCAP, enough oil to enable LOCAP to meet its operating expenses and debt service obligations.
Flexible Dividend Policy: LOCAP has a flexible dividend policy, in which the owners can elect to reduce dividend should LOCAP needs to conserve cash and improve credit metrics.
Leverage Uptick: Fitch expects LOCAP's leverage to be modestly higher than previous forecast, given the higher operating expense.
LOCAP is a 48 inch, approximately 54 mile federally regulated crude pipeline that primarily connects LOOP's Clovelly Hub to LOCAP's storage facility at St.
LOCAP's leverage metrics are much lower than its operator LOOP LLC (BBB+/Negative) or its midstream peers such as its lower rated peers such ITT Holdings LLC (BBB-/Negative) and Buckeye Partners, LP (BBB-/Negative).
Furthermore, LOCAP's debt is also entirely backed by T&D agreements with the affiliates of its owners, whereas its midstream peers do not have such feature for their borrowings.
-Fitch forecasts throughput volumes for LOCAP to remain stable throughout the forecast years;
Dividends to owners fluctuate based on LOCAP's cash flow; Fitch assumes past dividend flexibility will continue;
-An upgrade is not viewed as likely given that LOCAP is a single asset entity that lacks significant size and scale.
-Negative rating actions at the parents of LOCAP's T&D obligors or unfavorable revisions in T&D support agreements;
-A further shift in crude transportation dynamics which permanently reduces LOCAP's throughput volumes;