March 20, 2012 / 7:52 PM / 5 years ago

TEXT-S&P affirms Williams Partners, Williams Cos ratings

March 20 - Overview	
     -- U.S. midstream energy company Williams Partners L.P. announced it will 	
acquire privately owned gatherer and processor Caiman Eastern Midstream LLC 	
for $2.5 billion.	
     -- We are affirming our 'BBB' corporate credit ratings on Williams 	
Partners, its parent company, The Williams Cos. Inc., and its operating 	
subsidiaries, Transcontinental Gas Pipe Line Co. LLC and Northwest Pipeline 	
G.P.	
     -- The stable rating outlook reflects our expectations that Williams 	
Partners will maintain stand-alone financial leverage below 4x and the parent 	
company will maintain consolidated financial leverage in the low-4x area pro 	
forma for the transaction.	
	
Rating Action	
On March 20, 2012, Standard & Poor's Ratings Services affirmed its 'BBB' 	
corporate credit rating on Williams Partners L.P. (WPZ) and its operating 	
subsidiaries, Transcontinental Gas Pipe Line Co. LLC (Transco), and Northwest 	
Pipeline G.P. (Northwest). At the same time, we affirmed our 'BBB' corporate 	
credit ratings on parent company The Williams Cos. Inc.. The outlook is
stable.	
	
Rationale	
We affirmed our corporate credit ratings on WPZ and Williams based on our view 	
that the benefits the Caiman Eastern Midstream LLC acquisition will provide to 	
the partnership's business risk profile will balance weaker consolidated 	
financial leverage metrics. In our opinion, WPZ and Williams' plan to fund the 	
acquisition with about 71% equity supports credit, and we expect WPZ's 	
distribution coverage will remain acceptable at about 1.1x pro forma for the 	
transaction. We believe the Caiman acquisition enhances WPZ's business risk 	
profile because it broadens the midstream segment's geographic reach in the 	
liquids-rich area of the Marcellus Shale as well provides an initial step into 	
the Utica Shale. However, debt to EBITDA will worsen on a consolidated basis 	
because acquisition cash flow is slow to ramp up (about $40 million in 2012) 	
and WPZ will need to fund about $500 million of capital expenditures 	
associated with the purchase. For year-end 2012, we expect consolidated debt 	
to EBITDA to increase to the low 4x area compared with our previous 	
expectations of 3.5x to 3.75x.  We believe WPZ's stand-alone pro forma debt to 	
EBITDA will be about 4x.	
	
Liquidity	
We assess Williams' pro forma consolidated liquidity as "adequate" under our 	
criteria. We project sources divided by uses of about 1.2x for the next 12 	
months. Key sources include our assumptions for FFO of about $2.1 billion, 	
cash of about $890 million, and full availability of Williams' $900 million 	
credit facility and WPZ's $2 billion credit facility due in June 2016. Primary 	
uses include total capital spending of about $4.1 billion (excludes 	
acquisition), debt maturities of $350 million, and dividends and distributions 	
of about $950 million area. A key assumption underlying our assessment of 	
Williams' liquidity is that the company would scale back capital expenditures, 	
the majority of which is discretionary, if it could not raise sufficient funds 	
to finance its growth projects.	
	
Outlook	
The stable outlook reflects our expectations that Williams will maintain 	
consolidated financial leverage below 4.25x and adequate liquidity while 	
successfully integrating the Caiman acquisition and executing on its organic 	
growth plans over the intermediate term. Higher ratings are unlikely absent a 	
notably more conservative financial policy. We could lower the ratings if 	
lower gathering volumes and NGL prices pressure cash flow, or the Caiman 	
acquisition underperforms such that consolidated debt to EBITDA remains above 	
4.25x on a sustained basis.	
	
Related Criteria And Research	
     -- Standard & Poor's Revises Its Natural Gas Liquids Price Assumptions 	
For 2011, 2012, and 2013, Oct. 7, 2011	
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011	
     -- Rating Criteria For U.S. Midstream Energy Companies, Dec. 18, 2008	
	
Ratings List	
Ratings Affirmed	
	
Williams Partners L.P.	
 Corporate Credit Rating                BBB/Stable/--      	
 Senior Unsecured                       BBB	
	
Transcontinental Gas Pipe Line Co. LLC	
 Corporate Credit Rating                BBB/Stable/--	
 Senior Unsecured                       BBB                	
	
Northwest Pipeline G.P.	
 Corporate Credit Rating                BBB/Stable/--      	
 Senior Unsecured                       BBB	
	
The Williams Cos. Inc.	
 Corporate Credit Rating                BBB/Stable/--      	
 Senior Unsecured                       BBB-               	
 Junior Subordinated                    BB+                	
 Preferred Stock                        BB+                	
	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 	
by this rating action can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below