S&P Global has upgraded Origin’s ratings from stable to positive following the divestment of its Lattice Energy assets for $1.6 billion as the company drives down its debt levels.
It also affirmed the BBB- long-term and A-3 short-term credit rating for Origin, as well as a BBB- rating on its senior, unsecured debt, and a BB rating of the subordinated debt issued by Origin.
The re-rating was driven in part by Origin’s chief executive Frank Calabria’s statements that the company will use the proceeds from the Lattice sale to pay down its debt levels, putting it on track to reduce its net debt levels below $7 billion by June 30.
” We revised the outlook to positive to reflect our expectations that Origin’s financial metrics would sustain at stronger levels over the next 12 to 24 months, commensurate with a higher rating,” S&P Global said in a company statement.
“The metrics improvement will depend on the company’s financial policies, including the timing and level of distributions, the company’s willingness to reduce debt further, and its commitment to maintaining hybrids in its capital structure.”
S&P forecasts continued growth for the company for this financial year, and the potential to strengthen its ratings position especially if the company continues to pay down its debt.
“The positive rating outlook reflects our expectations that the stable operating environment for Origin’s energy market segment will enable the company to generate modest underlying growth and strong positive free operating cash flows over the next two to three years,” it stated.