The ratings of
KEY RATING DRIVERS
Financing Plan: Fitch expects TE's financial profile to moderately weaken as a result of the additional leverage associated with the NMGC acquisition. TE's current financing plan for the
Pressure on Credit Metrics: Fitch forecasts adjusted debt/EBITDAR to be between 4.3x and 4x over 2014-2016, and FFO adjusted leverage between 4.2x and 3.9x, over the same time period. Credit metrics remain in line with TE's current rating category, and therefore may support a rationale for affirming the ratings upon resolution of the Watch Negative. TE's credit metrics significantly improve by 2017, driven primarily by the incremental rate increase at
Resolving the Rating Watch Negative: Fitch would consider affirming TE's existing ratings if the company can successfully execute the proposed financing plan and support credit metrics as currently projected by Fitch. Conversely, a greater use of leverage to fund the transaction would likely lead to a one-notch downgrade. TE's 'F2' short-term rating would also be lowered to 'F3' concurrent with the one-notch downgrade of TE's 'BBB' IDR.
Strong Utility Performance: TE's credit quality reflects
Fitch issued a separate press release discussing
Parent Cash Flow Generation: Cash flows are bolstered by NOLs that effectively shelter net income from taxes through 2018. NOLs total approximately
Acquisition of a Low-Risk Business: NMGC is the largest regulated natural gas local distribution company (LDC) in
Factors that could lead to a positive rating action:
--Successful execution of TE's financing plan that reflect leverage metrics that are consistent with Fitch's projections could lead to affirmation of TE's ratings upon resolution of the Rating Watch Negative.
Factors that could lead to a negative rating action:
--Greater than projected debt levels to fund the transaction, leading to leverage metrics that are weaker than currently forecasted by Fitch, would likely result in a one-notch downgrade;
--Unexpected deterioration in
Fitch maintains the following ratings on Rating Watch Negative:
--Short-term IDR 'F2'.
--Long-term IDR 'BBB';
--Short-term IDR 'F2';
--Senior unsecured debt 'BBB'.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage' (
--'Rating U.S. Utilities, Power and Gas Companies' (
--'Recovery Ratings and Notching Criteria for Utilities' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Rating U.S. Utilities, Power and Gas Companies (Sector Credit Factors)
Source: Fitch Ratings
Most Popular Stories
- Congress Passes Law Promoting Transparency Reconstruction of Haiti
- UFC Fight Night Sees Robbie Lawler Win Unanimous Decision
- Four DC Comics Properties Brought to TV Get Comic-Con Event
- 'Guardians of the Galaxy ' Sequel Slated for 2017
- Plan to Simplify 2015 Health Renewals May Backfire
- Desktop, Laptop Setups Still King
- Shania Twain's Vegas residency ending after 110 shows
- Google Confirms $1B Acquisition of Twitch.tv
- Demand for Fair Trade Brings Big Opportunity, Clear Conscience
- Zillow in Reported $2B Bid for Real Estate Rival Trulia