News Column

Fitch Affirms Williams and Williams Partners on Acquisition News

June 16, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) of Williams Partners L.P. (WPZ) and Williams Companies, Inc. (WMB) at 'BBB' and 'BBB-', respectively. The rating action considers the proposed acquisition by WMB of the remaining 50% general partner (GP) interest and 55 million limited partner (LP) units in Access Midstream Partners (ACMP) and eventual plans to merge WPZ and ACMP. The Rating Outlook for WPZ and WMB is Stable.

Fitch has also affirmed the ratings for WPZ affiliate, Williams Partners Finance Corporation (WPFC). The Outlook for WPFC is Stable.

A full list of affected ratings appears at the end of this release. Approximately $10.55 billion of long-term debt is affected.

WMB will acquire the ACMP interests from Global Infrastructure Partners for $5.995 billion in cash. WMB expects to close the acquisition in the third quarter of 2014 pending Hart-Scott-Rodino Act approval. The closing of the acquisition is not conditioned upon consummation of the proposed WPZ/ACMP merger.

WMB indicates it plans to fund approximately half the acquisition with equity and the remainder with a combination of long-term debt, revolver borrowings and cash on hand. WMB plans on repaying revolver borrowings with the proceeds from the drop-down of its remaining NGL & Petchem Services assets and projects. WMB has entered into a backup interim-liquidity facility that would be available to fund the acquisition.

WMB proposes to merge in a unit-for-unit exchange at a ratio of 0.85 ACMP units per WPZ unit. The proposal includes a make-whole option for WPZ unitholders to compensate for a lower expected unit distribution post-merger. The proposed merger will be subject to negotiation, review and approval by conflicts committees of each partnership's board of directors and approval by WPZ unitholders.

KEY RATING DRIVERS:

Increased Scale and Diversity: WPZ and WMB's ratings are supported by the benefits of the ACMP acquisition and ongoing organic growth projects which continue to increase the scale and diversity of its operations. WMB's 2015 consolidated EBITDA is expected to exceed $5 billion. Also, WMB's and WPZ's relative exposure to volatile natural gas liquids (NGL) prices is lessening due to the build-out of fee-based pipeline and midstream facilities in the Marcellus and Utica production basins and through the operation of WPZ's Geismar olefins production facility. ACMP's midstream operations are 100% fee-based and will further reduce commodity price exposure.

Of some concern is the status of the rebuild and expansion of WPZ's Geismar olefins plant that is now targeting a late July startup which was delayed from a previous expected startup in late June. In addition project capital spending estimates will increase and business-interruption recoveries may fall short of prior expectations. As a result, WPZ has lowered its 2014 financial guidance.

Forward Expectations: WPZ's adjusted 2013 debt to EBITDA was approximately 4.0x. Benefiting from the Canadian asset dropdown and associated equity funding, WPZ's leverage should approximate 4.0x in 2014, although the financial impact of the Geismar plant startup delay could push leverage metrics modestly higher. Given expected financing for the ACMP transaction, WMB's 2014 consolidated debt to EBITDA will likely exceed 4.5x, while its parent-level leverage should approximate 2.0x. Credit measures for both WPZ and WMB should strengthen modestly in 2015 as several large organic projects come on line and the benefits of increased fixed-fee revenues are felt.

Favorable Liquidity: WPZ has access to a $2.5 billion revolving credit facility that matures in July 2018 and backstops a $2 billion CP program. WPZ had no outstanding CP as of March 31, 2014. Transcontinental Gas Pipe Line Company, LLC (TGPL) and Northwest Pipeline LLC (NWP) are each co-borrowers under WPZ's revolver for up to $500 million. The revolver financial covenants include a maximum consolidated leverage ratio of 5.0x or 5.5x during a period following an acquisition. Pipeline affiliates TGPL and NWP have debt-to-cap maximums of 65%. The revolver also includes a change of control clause, limitations on liens, and restrictions on asset sales and mergers.

WMB's liquidity position is expected to remain strong given its cash resources and minimal refinancing requirements. In addition to the $5.995 billion acquisition facility, WMB has a $1.5 billion unsecured revolving credit facility that matures July 2018. The revolver has a maximum debt to EBITDA ratio of 4.5x (5.0x following acquisitions of $50 million or more). There are currently no borrowings under the revolver. WMB has $529 million of cash and no near-term debt maturities.

RATING SENSITIVITIES:

Positive: Future developments that may, individually or collectively, lead to a positive rating action include:

WPZ

--Increased scale and diversity of assets;

--A greater percentage of revenues generated from pipelines and other fixed-fee assets;

--Expectations for strong credit measures with sustained leverage below 3.75x.

WMB

--Increased scale and diversity of assets;

--A greater percentage of revenues generated from fixed-fee assets;

--An upgrade at WPZ.

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

WPZ

--Increasing commodity risk;

--Extended outages at the Geismar not covered by insurance;

--Weaker credit metrics with sustained leverage above 4.5x.

WMB

--Increasing commodity risk;

--Weaker credit measures with sustained leverage above 5.0x;

--A downgrade at WPZ.

Fitch affirms the following ratings with a Stable Outlook:

Williams Partners L.P.

--IDR at 'BBB';

--Senior unsecured debt at 'BBB';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

Williams Partners Finance Corporation

--IDR at 'BBB';

--Senior unsecured debt at 'BBB'.

The Williams Companies, Inc.

--IDR at 'BBB-';

--Senior unsecured debt at 'BBB-';

--Junior subordinated convertible debentures at 'BB'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research

--'Corporate Rating Methodology, Including Parent and Subsidiary Linkage' May 28, 2014;

--'Non-Traditional MLP Assets; Changing Mix, Changing Risk' May 6, 2014;

--'Scenario Analysis: Lifting the Crude Export Ban' Jan. 23, 2014;

--'Rating Pipeline, Midstream and MLPs-Sector Credit Factors' Jan. 13, 2014;

--'NGL Pipelines: Northeast Supply Drives New Projects' Dec. 20, 2013;

--'2014 Outlook: Midstream Services' Dec. 10, 2013;

--'2014 Outlook: Crude Oil and Refined Products Pipelines' Dec. 9, 2014;

--'2014 Outlook: Natural Gas Pipelines' Dec. 5, 2013;

--'Crossover Credits in Natural Resources' Oct. 31, 2013;

--'Credit Considerations for the GP/LP Relationship' Nov. 6, 2013;

--'Funding U.S. LNG Export Facilities' Aug. 20, 2013.

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=834863

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Ralph Pellecchia

Senior Director

+1-212-908-0586

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Kathleen Connelly

Director

+1-212-908-0290

or

Committee Chairperson

Mark Sadeghian, CFA

Senior Director

+1-312-368-2090

or

Media Relations

Brian Bertsch, +1-212-908-0549

brian.bertsch@fitchratings.com


Source: Fitch Ratings


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Business Wire


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters