S&P Global revises Centuri Holdings outlook to stable

Investing.com -- S&P Global Ratings revised its outlook on Centuri Holdings Inc. to stable from developing and affirmed its ’B+’ issuer credit rating on Monday.

The rating agency also assigned a ’B+’ issue-level rating and ’3’ recovery rating to Centuri’s proposed $770 million term loan.

The stable outlook reflects S&P’s expectation that the utility infrastructure services company will continue to benefit from higher utility investments on grid resiliency. This should allow Centuri to achieve EBITDA growth and maintain adjusted debt to EBITDA around 4x over the forecast period.

According to S&P, Centuri’s 2024 adjusted debt to EBITDA was 4.3x, and the agency believes leverage will modestly improve due to EBITDA growth. The proposed refinancing also removes uncertainty about the company’s capital structure following its separation from parent Southwest Gas Holdings Inc. (NYSE:SWX).

SWX continues selling its stake in Centuri, having completed two secondary public offerings and a private placement to Icahn Partners L.P. These transactions have reduced SWX’s ownership from 81% following the 2024 IPO to about 53% currently. SWX has agreed to sell additional shares to Icahn that would further reduce its stake to 52.1%.

Centuri announced it will refinance its existing facilities with a new $450 million revolving credit facility due 2030 and a $770 million term loan B facility due 2032. While this transaction is largely leverage-neutral, it addresses uncertainty about the company’s post-separation capital structure.

Despite a nearly 20% decline in EBITDA during 2024 compared to 2023, Centuri’s leverage remained relatively unchanged at 4.3x. The company paid down about $315 million of gross debt using IPO proceeds, offsetting the impact of lower cash flows.

S&P expects leverage will improve to the low-4x area in 2025 and below 4x by 2027, driven by increased spending by electric utilities. Population growth and data center demand are expected to boost utility capital spending to address load growth and grid resiliency needs.

Approximately 80% of Centuri’s business comes from master service agreements with investment-grade utilities. The company has announced about $1.2 billion in new and renewed MSAs so far this year, adding to its backlog of approximately $4.5 billion as of March 2025.

S&P could lower its ratings if Centuri’s leverage exceeded 5x or if free operating cash flow to debt remained below 5%. Conversely, ratings could be raised if debt to EBITDA improved to below 4x and free operating cash flow to debt consistently exceeded 10%.

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