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.