OREANDA-NEWS. S&P Global Ratings said today that it has assigned its 'BBB-' debt ratings to Sabine Pass Liquefaction LLC's (SPLIQ) proposed $1 billion senior secured notes due 2027. The outlook is stable.

"The credit driver for the recent upgrade is an improvement in the construction phase stand-alone credit profile (SACP) of one notch to 'bbb-' from 'bb+', based on our conclusion that construction funding sources exceed needs in our construction phase downside case," said S&P Global credit analyst Terry Pratt. Our operations phase SACP is unchanged at 'bbb-'; however, some changes in underlying assessments have occurred. The operations phase assessment factors in this proposed $1 billion senior secured notes issuance, which essentially reduces SPLIQ credit facility capacity by a similar but smaller amount as interest during construction will rise a bit.

The stable outlook over the forecast period of the next two years reflects our conclusion that construction will progress as planned and that costs will not rise materially from our current expectations. Our stable outlook takes into account our assessment of the impact on financial performance from the planned note issuance to reduce credit facility capacity.

During the next two years of construction, an upgrade would require an improvement in the construction phase analysis, which would require that the funding provided by the credit facility and pre-completion cash flow from operating trains were more certain, but we consider this a remote possibility. Credit facility draws are subject to conditions precedent and reliance on pre-completion cash flows to fund construction is likely to persist through most of the construction phase. In addition, raising the rating would require an improvement in our assessment of GAIL's creditworthiness.

Factors that could lead to a downgrade in the next two years would be a material increase in construction costs or significantly lower pre-completion cash flow, but we consider these remote possibilities right now. The rating would also likely fall if we lower our view of Gail's creditworthiness, since we consider it to be an irreplaceable counterparty during the operations phase. We do not know if SPLIQ could replace it with another off-taker on the same terms and under what timeframe.