Niska Gas Upgraded At Credit Suisse, Firm Calls New Deal 'Attractive'

In a report published Tuesday, Credit Suisse analyst John Edwards upgraded the rating on

from Underperform to Neutral, while raising the price target from $3 to $4. Niska Gas has inked a deal with

to sell the partnership, including the managing member and IDRs, for a total consideration of about $912mm. Under the terms of the agreement, Brookfield has agreed to acquire all of Niska Gas's outstanding units for $4.225 per unit in cash, which represents a 223 percent premium to the price at which Niska Gas closed on Jun 12. The total consideration includes assumption of Niska Gas's debt of about $770mm at the end of F4Q15. The deal is expected to close in 2H16. "Importantly, for an undisclosed limited period, NKA can discuss and negotiate alternative acquisition proposals with third parties – subject to Brookfield having the right to match the offer or receiving a termination fee," analyst John Edwards said. Under the deal, Brookfield has agreed to lend Niska Gas $50mn, which "addresses concerns surrounding NKA's ability to support working capital requirements (primarily used for proprietary trading). With NKA's FCCR ratio likely to fall below 1.1x in F1Q16, 15% of its borrowing base ($268.4mm) will become unavailable." Edwards estimates the total available liquidity at around $104mm. Edwards expects Niska Gas's stock to continue to trade slightly lower than the transaction value, saying that the risk to the upgrade in rating are the "timing of transaction closure due to longer than expected time horizon and the receipt of regulatory approvals."