Investing.com -- On Wednesday, Moody’s Ratings announced a downgrade of PBF Holding Company LLC’s (PBF) Corporate Family Rating (CFR) to Ba3 from Ba2. The downgrade also included a reduction in the Probability of Default Rating to Ba3-PD from Ba2-PD and a drop in senior unsecured notes ratings to B1 from Ba3. Additionally, the Speculative Grade Liquidity (SGL) rating was lowered to SGL-3 from SGL-2, with the outlook for the company remaining negative.

Jonathan Teitel, a Moody’s Vice President, stated, "The downgrade of PBF’s ratings reflects greater than anticipated increases to debt from negative free cash flow and heightened risk that debt and financial leverage remains elevated for much longer than expected." This downgrade reflects concerns about PBF’s financial stability amid challenging market conditions.

PBF’s current Ba3 CFR mirrors the company’s fluctuating cash flow and leverage situation, which is somewhat balanced by its substantial refining capacity. The company operates six refineries in the United States, which enables it to benefit from economies of scale. However, PBF is currently navigating through economic uncertainties and a difficult environment for refining margins. In 2025, PBF has undergone turnarounds at four of its six refineries, necessitating considerable capital investment, with two already completed.

Earlier this year, PBF faced operational setbacks due to a fire at its Martinez refinery in February, which caused extensive damage and led to an extended closure. While partial operations resumed in April, full operations are not expected to restart until the fourth quarter of 2025. PBF is also dealing with the aftermath of a weather-related shutdown at its Torrance refinery in California, which lasted about a month. Despite these challenges, PBF anticipates a gradual increase in debt for the remainder of 2025, with an improvement in EBITDA forecasted for 2026, which could reduce leverage to around 3x.

PBF Energy (NYSE: PBF ) Inc., the parent company of PBF, also holds PBF Logistics (NYSE: PBFX ) LP, a midstream infrastructure operator associated with PBF’s refineries. PBF Logistics, which carries no debt, is capable of distributing cash to PBF Energy. In April 2025, PBF Logistics arranged to sell two refined products terminal facilities for $175 million, with the deal expected to finalize in the latter half of the year. PBF Energy is also working towards achieving over $200 million in cost savings by year’s end, which could enhance EBITDA.

As of March 31, 2025, PBF’s liquidity is considered adequate through mid-2026, with $443 million in cash and a $3.5 billion Asset-Based Lending (ABL) revolving credit facility, of which approximately $2.0 billion was available. PBF had utilized $200 million of the facility, with $167 million in letters of credit issued. The company’s senior notes, which are due in 2028 and 2030, are rated a notch below the CFR at B1 due to their subordinate status to the senior secured revolving credit facility.

The negative outlook from Moody’s underscores the potential risks stemming from the challenging operational landscape and the uncertainty caused by the Martinez refinery incident and ongoing maintenance activities. These factors could lead to more significant negative free cash flow and debt increases than currently anticipated. Moody’s also notes that factors such as worsening operating performance, higher debt, or reduced liquidity could trigger further downgrades, while improved operations, consistent positive free cash flow, and substantial debt reduction could lead to an upgrade.

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