The rating action considers the proposed acquisition by The Williams Companies, Inc. (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 is Stable.
Following its acquisition of ACMP units, WMB proposes to merge the two master limited partnerships (MLPs) 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
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 it 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.
Favorable Liquidity: WPZ has access to a
Positive: Future developments that may, individually or collectively, lead to a positive rating action include:
--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.
Negative: Future developments that may, individually or collectively, lead to a negative rating action include:
--Increasing commodity risk;
--Extended outages at the Geismar not covered by insurance;
--Weaker credit metrics with sustained leverage above 4.5x.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology, Including Parent and Subsidiary Linkage'
--'Non-Traditional MLP Assets; Changing Mix, Changing Risk'
--'Scenario Analysis: Lifting the Crude Export Ban'
--'Rating Pipeline, Midstream and MLPs-Sector Credit Factors'
--'NGL Pipelines: Northeast Supply Drives New Projects'
--'2014 Outlook: Midstream Services'
--'2014 Outlook: Crude Oil and Refined Products Pipelines'
--'2014 Outlook: Natural Gas Pipelines'
--'Crossover Credits in Natural Resources'
--'Credit Considerations for the GP/LP Relationship'
--'Funding U.S. LNG Export Facilities'
Source: Fitch Ratings
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