Apro LLC

The stable outlook reflects our expectation that Apro will generate steady cash flow, maintain adequate liquidity, and improve adjusted leverage to the mid- to low-6x area by the end of 2021. We could lower our rating on Apro if operating performance weakens, possibly because of heightened competition, sustained sharply higher fuel prices, or significant changes to its fuel consignment agreement. This could lead to: Adjusted debt to EBITDA exceeding 7.5x; or Interest coverage declining to less than 1.5x. We could raise the rating if: Apro diversifies its sales mix to include a higher contribution of inside sales while expanding its scale and concentrated geographic footprint; and It pursues a more prudent financial policy, including lower adjusted leverage of less than

...Apro LLC's (d/b/a United Pacific) long-term fuel consignment agreement with Phillips 66 supports steady cash flow generation. We continue to view Apro's long-term fuel supply agreement as unique in the industry. It covers 80% of the company's retail gallons sold and limits exposure to fuel price volatility, supporting our positive comparable rating analysis assessment. In the first half of 2020, higher earnings from the fuel consignment agreement the company renegotiated in 2019 and relatively strong cents per gallon (CPG) offset the negative impact of lower fuel volumes due to the COVID-19 pandemic. Apro participates in the highly competitive and fragmented convenience store industry with significant geographic concentration in Southern California. We believe its product differentiation is limited as the company mainly focuses on commoditized products, leading to low switching costs for consumers. In addition, its store footprint is highly concentrated in Southern California, where competition...

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