March 20, 2012 / 1:42 PM / 6 years ago

TEXT-Fitch affirms Williams Cos, Williams Partners

March 20 - Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) and
senior debt ratings for The Williams Companies, Inc. (WMB) and Williams
Partners L.P. (WPZ) at 'BBB-'. The action follows WPZ's announced plan to
acquire Caiman Eastern Midstream (Caiman) for $2.5 billion. WMB's Rating Outlook
is Stable. Also affirmed are ratings for WPZ affiliates, Williams Partners
Finance Corporation (WPFC), Northwest Pipeline GP (NWP), and Transcontinental
Gas Pipeline Company, LLC (TGPL). The Rating Outlooks for WPZ, WPFC, NWP and
TGPL remain Positive. A full list of ratings appears at the end of this release.	
	
Approximately $8.7 billion of outstanding long-term debt is affected.	
	
On March 19, 2012, WPZ announced that it has agreed to acquire Caiman, a
gathering and processing business located in the liquids-rich area of the
Marcellus Shale. The acquisition includes dedicated acreage and gathering and
processing commitments from nine producers. The transaction is expected to close
in 30 to 40 days.	
	
The $2.5 billion purchase price for Caiman will consist of cash of $1.78 billion
and $720 million of WPZ equity issued to the seller. WPZ plans to fund the cash
portion of the acquisition with a combination of public equity, debt, and
available cash and an equity investment of $1.0 billion from WMB. WMB plans to
fund its equity investment in WPZ with a combination of public equity, debt and
available cash.	
	
Key Rating Factors: The rating affirmation reflects WMB's and WPZ's ability to
maintain their strong projected credit measures due to the significant planned
use of equity financing to fund the acquisition. In addition, the large majority
of EBITDA associated with the Caiman assets is expected to be fee-based. As a
result, a lower percentage of future revenues will be subject to commodity price
risk.	
	
WPZ's Positive Outlook reflects the expanding scale and scope of its operations,
the predictability of cash flows generated by its pipeline and fee-based
midstream assets, above average credit metrics, and conservative financial
practices including a willingness to issue equity to fund growth and by
maintaining sustainable partnership distributions. Also considered is WPZ's
relationship with WMB, owner of its general partner interest and 73% of its
limited partner interests, pre-Caiman related equity.	
	
TGPL's and NWP's ratings and Positive Outlooks reflect their strong individual
operating and financial profiles, offset by the structural and functional ties
between these entities and their parent WPZ. Operationally, TGPL and NWP are
considered two of the premier pipeline systems in the U.S. Both pipelines boast
competitive rate structures, operate in relatively secure markets, have a high
percentage of capacity subscribed under medium-term to long-term contracts with
utility counterparties, and have manageable expansion plans.	
	
Forward Expectations: Fitch projects WMB's 2012 consolidated debt to EBITDA to
be approximately 4.0 times (x) and parent-level leverage to be 1.3x or below.
Debt to EBITDA at WPZ for 2012 is expected to be between 3.5x and 4.0x. These
post-acquisition projected credit ratios are relatively unchanged from Fitch's
prior projections utilized for the companies' February 2012 annual credit
review. Leverage ratios for both WMB and WPZ should end the year at the lower
end of the range of expectations if NGL frac spreads continue near current
strong levels. NWP and TGPL should continue to maintain strong credit metrics
for their rating category for the next several years with debt to EBITDA below
3.0x.	
	
Liquidity: WMB's liquidity is expected to be strong given its substantial cash
resources, minimal debt refunding requirements, and reduced capital spending
with the separation of its oil and gas business at year-end 2011. Debt
maturities for the next ten years are insignificant. WMB has a $900 unsecured
revolving credit facility that matures in June 2016. The revolver has a maximum
debt to EBITDA ratio of 4.5 to 1.0; no greater than 5.0 to 1.0 following
acquisitions of $50 million or more. A default at WPZ is an event of default
under the WMB revolver. There are $0 borrowings outstanding under the WMB
revolver.	
	
WPZ has entered into an interim liquidity facility for $1.78 billion which is
available, if necessary to fund the full amount of the cash consideration. In
addition, WPZ has a $2.0 billion unsecured revolving credit facility that
matures in June 2016. Both TGPL and NWP are co-borrowers for up to $400 million
each under the WPZ revolver. Debt maturities for WPZ, TGPL and NWP are
manageable, with the only refinancing for the three companies through 2014 being
a $325 million TGPL note maturity in 2012. The WPZ revolver has a maximum
consolidated debt to EBITDA ratio of 5.0 to 1.0; no greater than 5.5 to 1.0
following acquisitions of $50 million or more. In addition, debt to
capitalization for TGPL and NWP can be no greater than 65%. There are $0
borrowings under the WPZ revolver.	
	
Catalysts for Future Rating Actions: Possible catalysts for positive rating
actions at WMB include consolidated and parent company standalone de-leveraging,
lowered business risk, and improving credit quality at WPZ. Possible catalysts
for positive rating actions at WPZ include increasing scale and diversity of
assets, a greater percentage of revenues generated from pipelines and other
fixed-fee assets, and maintenance of strong credit measures under a less
favorable commodity price environment. A possible catalyst for positive rating
actions at TGPL and NWP is a WPZ upgrade.	
	
Possible catalysts for negative rating actions for WMB include increasing
leverage, a rating downgrade at WPZ, and poor performance from Canadian and
olefins operations. Possible catalysts for negative rating actions at WPZ
include increasing commodity risk and materially weaker financial performance. A
possible catalyst for negative ratings action at TGPL and NWP is a WPZ
downgrade.	
	
Fitch affirms the following ratings with a Stable Outlook:	
	
The Williams Companies, Inc.	
--IDR at 'BBB-';	
--Senior unsecured debt at 'BBB-';	
--Junior subordinated convertible debentures at 'BB'.	
	
Fitch affirms the following ratings with a Positive Outlook:	
	
Williams Partners L.P.	
--IDR at 'BBB-';	
--Senior unsecured debt at 'BBB-'.	
	
Williams Partners Finance Corporation	
--IDR at 'BBB-';	
--Senior unsecured debt at 'BBB-'.	
	
Transcontinental Gas Pipeline Company, LLC	
--IDR at 'BBB';	
--Senior unsecured debt at 'BBB'.	
	
Northwest Pipeline GP	
--IDR at 'BBB';	
--Senior unsecured debt at 'BBB'.	
	
	
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.	
	
Applicable Criteria and Related Research:	
--'Corporate Rating Methodology' (Aug. 12, 2011);	
--'Parent and Subsidiary Rating Linkage' (Aug 12, 2011);	
--'Master Limited Partnerships 101' (Nov. 1, 2011).	
	
Applicable Criteria and Related Research:	
Corporate Rating Methodology	
Parent and Subsidiary Rating Linkage	
Master Limited Partnerships 101

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