Fitch Upgrades ONEOK Credit Rating to 'BBB+' After Apollo Investment

Fitch Ratings has upgraded ONEOK's (NYSE:OKE) long-term issuer default rating to 'BBB+' from 'BBB', assigning a stable outlook. The upgrade follows the closing of a significant minority equity investment from Apollo Global Management and the subsequent repayment of over $5 billion in existing debt.

Improved Leverage Profile

The primary driver for the upgrade is ONEOK's improved financial leverage. Fitch calculates that the company's pro forma leverage will immediately decline to 3.5x debt-to-EBITDA and is expected to remain below that level, supported by management's new leverage policy targeting a ratio of around 3.25x.

Critically, the ratings agency treats the investment from Apollo as equity rather than debt in its analysis. This classification significantly strengthens ONEOK's balance sheet and is a key factor supporting the higher rating.

Strategic Acquisition in Permian Basin

Fitch also viewed ONEOK's announced acquisition of Brazos Midstream, financed with proceeds from the Apollo deal, as a positive strategic move. The acquisition increases ONEOK's operational scale and strengthens its position in the highly productive Permian Basin.

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The Brazos Midstream assets include long-term, fee-based acreage dedication contracts with major regional producers, which is expected to provide stable, predictable cash flows for ONEOK.

Details of the Investment

Under the terms of the deal, Apollo receives 15% of cash flow from operations via Class B distributions. Fitch noted that ONEOK's debt obligations are serviced before any distributions are paid to Apollo, and the investment firm will not have any representatives on ONEOK's board of directors.

In related actions, Fitch assigned a 'BBB+' long-term rating to the newly created parent entity, ONEOK, Inc., and affirmed the company's short-term rating at 'F2'. The agency also withdrew its ratings for ONEOK Partners, L.P., as the entity no longer exists post-merger.