GIP III Stetson I L.P.

The stable outlook on Stetson reflects our expectation that it will maintain adequate liquidity and stand-alone adjusted debt leverage in the 8x area over the next 12 months. The stable outlook also reflects our belief that EnLink will maintain a distribution coverage ratio of more than 1.0x. We could lower our rating on Stetson if EnLink reduces its distribution, which would lead us to view the company's capital structure as unsustainable. We could upgrade Stetson if we raise our rating on EnLink, which could occur if EnLink maintains stand-alone leverage of less than 4.5x. We could also consider raising our rating if Stetson maintains stand-alone debt to EBITDA of less than 5.0x such that the underlying distributions from EnLink remain

...Although we expect its stand-alone leverage to remain elevated over the next few years, an increase in EnLink's distributions will help GIP III Stetson L.P. (Stetson) deleverage. Given the announced increase in EnLink's distributions, we now expect the company's leverage to be in the 7.5x-8.5x range over the medium term, which is about 150 basis points lower than our previous expectation. While we expect EnLink's distributions to Stetson will remain stable at $0.45 over the medium term, we anticipate that the sweep structure on its term loan will lead to increased debt paydown over the next few years. Based on our current leverage expectations, we project Stetson will sweep 75% of its excess cash for term loan repayment ($30 million-$35 million annually) in addition to the mandatory amortization of $10 million per year. Outlook The stable outlook on Stetson reflects our expectation that it will maintain adequate liquidity and stand-alone adjusted debt leverage in the 8x area over the next...

Full Report