OREANDA-NEWS. Fitch Ratings continues to view MPLX LP's (MPLX; IDR 'BBB-'/Stable Outlook) acquisition of MarkWest Energy Partners, L.P. (MarkWest) as neutral to MLPX's credit rating.

MarkWest unitholders voted to approve the merger with MPLX on Dec. 1, 2015. Approximately 80% of unitholders supported the transaction. Some opposition to the deal remained up until the vote. The outcome of the vote was uncertain, and to gain support for the merger, MPLX's parent, Marathon Petroleum Corp. (MPC; IDR 'BBB'/Stable Outlook) increased its financial support. Following yesterday's announcement, MPLX's unit price fell 11.9% at the end of the day while MarkWest declined 4.2%.

The vote to proceed with the merger occurred after MPLX's parent sweetened the offer not once, but twice in November. MPC ultimately increased the total cash contribution it made to MWE holders to $1.28 billion to facilitate the completion of the deal. MPLX benefits from having a strong sponsor that can provide financial support for its long-term growth. The partnership has reiterated that distribution growth should be in the mid-20% on a compound annual growth rate through 2019.

MarkWest's senior unsecured bonds will be exchanged for new MPLX senior unsecured bonds, after the merger closes. The new MLPX notes will be pari passu with existing senior unsecured debt. The merger is expected to close on Dec. 4, 2015 subject to customary closing conditions.

Fitch affirmed MPLX's ratings when it first made the offer to acquire MarkWest. The transaction will enable MPLX to significantly enhance its asset and geographic diversity. Expectations for the credit profile remain intact which supported Fitch's rating affirmation in July 2015.

Fitch expects leverage at MPLX to be in the range of 4.5x - 4.75x in the long term. It is well below that currently and for the latest twelve months ending Sept. 30, 2015 it was 3.1x. Fitch has assumed balanced funding of growth spending consistent with MPLX's leverage (defined by MPLX as debt to last quarter's EBITDA annualized) target of 4x.

Capital market access, however, is a growing concern for MPLX as well as issuers in the MLP space given recent stock price declines and consequent rise in equity yields, which could lead to reluctance to issue equity to support growth.

Distribution coverage for the latest twelve months ending Sept. 30, 2015 was 1.46x. Fitch expects it to be approximately 1.3x at the end of 2015 and 2016. Beyond then it is expected to trend down to meet MPLX's target of 1.1x. Distribution growth is supported by growth from MarkWest in the near term. Its average annual growth budget is $1.5 billion a year for the next five years; most of that spending is focused on the Marcellus and Utica. Additional growth will come from significant drop-down growth prospects from MPC to MPLX to help it maintain distribution growth targets.

Liquidity for MPLX was sufficient as of Sept. 30, 2015. The partnership had full availability on its $1 billion revolver and $90 million of cash on the balance sheet. In late October, the revolver was amended in advance of the merger with MarkWest. Once the transaction closes on Dec. 4, 2015, the revolver will be upsized to $2 billion and extend through 2020.