March 20, 2012 / 6:02 PM / 6 years ago

TEXT-S&P rates Alon USA Energy's proposed loan 'B+'

March 20 - Standard & Poor's Ratings Services today assigned its 'B+' (one
notch higher than the corporate credit rating) issue-level rating to Alon USA
Energy Inc.'s proposed $700 million term loan due 2018. We assigned a
'2' recovery rating to this debt, indicating our expectation of substantial (70%
to 90%) recovery in a payment default. 	
	
The 'B+' issue rating incorporates our expectation that the company will use 	
the proceeds from the proposed loan to repay approximately $425 million 	
outstanding under its existing term loan and to retire approximately $216.5 	
million outstanding of the Alon Refining Krotz Springs Inc. 13.5% senior 	
secured notes due 2014. We expect to withdraw our existing ratings on these 	
issues upon successful completion of the above transactions.	
	

The rating on Dallas-based Alon USA Energy Inc. reflects its "vulnerable" 	
business risk (as our criteria define the term) and its challenges as a 	
relatively small, independent oil refining and marketing company, with limited 	
diversity and a high degree of financial and operating leverage. The ratings 	
also reflect the company's participation in the highly competitive refining 	
industry that has cyclical profitability and high fixed-cost requirements for 	
refinery equipment and compliance with environmental regulations. The ratings 	
also incorporate its parent Alon Israel Oil Inc.'s support for Alon USA Energy 	
Inc. Standard & Poor's takes a consolidated approach to Alon USA Energy Inc.'s 	
analysis and includes results from the Krotz Springs refinery. 	
	
We view the refining industry as extremely volatile, due to the supply-demand 	
economics of both crude supply and product demand, which can cause large 	
fluctuations in industry profitability within short periods of time. 	
	

RELATED RESEARCH AND CRITERIA	
     -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009.	
     -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, 	
May 27, 2009	
	
	
RATINGS LIST	
Alon USA Energy Inc.	
 Corporate credit rating                   B/Negative/--	
	
New Rating	
 Proposed $700 mil term loan due 2018      B+ 	
   Recovery rating                         2	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 	
by this rating action can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below