Fitch Rates Energy Transfer Partners, LP's Sr. Note Offering 'BBB-'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'BBB-' rating to Energy Transfer Partners, LP (ETP) offering of senior notes. Proceeds will be used to repay borrowings under ETP's credit facility, to fund capital expenditures and for general partnership purposes. Fitch currently has a 'BBB-' Issuer Default Rating (IDR) on ETP. The Rating Outlook is Stable.

In January 2015, ETP and Regency Energy Partners, LP (RGP; IDR 'BB'/Rating Watch Positive) announced their entry into a definitive merger agreement pursuant to which ETP will acquire RGP. The transaction is expected to close in the second quarter of 2015. The transaction is generally a positive one for ETP. Fitch believes that the transaction provides ETP with significant benefits including increased size and scale, a robust platform for growth, increased geographic exposure, and the opportunity for a fair amount of what should be easily achievable synergies. Fitch expects no material impact to leverage at ETP as a result of the transaction. Prior to the transaction Fitch's expectations for leverage at ETP for 2015 and 2016 was a range of 4.0x to 4.5x and pro forma for the transaction, leverage is expected by Fitch to remain within these ranges through 2015 - 2016.

KEY RATINGS DRIVERS

Increased Size, Scale and Diversity: Recent and ongoing mergers and growth projects at ETP have resulted in a larger, more diversified, and generally stronger partnership. ETP's percentage of contractually supported fee-based margins has gradually increased. The recently announced merger between ETP and RGP should provide ETP with increased cash flows driven by expected synergies and improved returns on growth projects previously planned at RGP. As mentioned, ETP should benefit from the increased size and scale, an increased project backlog, and increased geographic exposure, particularly in West Texas and the Marcellus and Utica shales.

Moderate Leverage Metrics: Fitch expects ETP's adjusted consolidated debt/EBITDA should range between 4.0x and 4.5x in 2015 and 2016. To the extent that leverage was expected to be meaningfully above 4.5x on a sustainable basis Fitch would likely take a negative ratings action.

Liquidity is Adequate: ETP has access to a $3.75 billion unsecured five-year revolving credit facility that matures in November 2019. As of March 3, 2015, there was a balance of $2.2 billion in revolving credit loans outstanding under ETP's revolving credit facility, and there were $122 million of letters of credit outstanding. Proceeds from this note offering are expected, in part, to repay credit facility borrowings. The credit facility contains a financial covenant that provides that on each date ETP makes a distribution, the leverage ratio, as defined in the credit agreement, shall not exceed 5.0x, with a permitted increase to 5.5x during a specified acquisition period, as defined in the credit agreement. ETP is currently in compliance with this covenant.

KEY ASSUMPTIONS:

Fitch's key assumptions within the rating case for the issuer include:

--WTI oil price that trends up from $50/barrel in 2015 to $60/barrel in 2016 and a long-term price of $75/barrel; and Henry Hub gas that trends up from $3/mcf in 2015 to $3.25/mcf in 2016 and a long-term price of $4.50/mcf consistent with Fitch's published Base Case commodity price deck;

--Moderate revenue growth on existing assets;

--Balanced funding with both debt and equity of growth capital spending and acquisitions.

RATING SENSITIVITIES:

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

ETP

--A material improvement in credit metrics with ETP adjusted leverage sustained at between 3.5x and 4.0x;

--A lessening of consolidated company business risk as ETP acquires and expands fixed-fee operations.

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

ETP

--Weakening credit metrics with ETP adjusted leverage above 5.0x;

--Increasing commodity exposure.

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

Applicable Criteria and Related Research:

--'2015 Outlook: Natural Gas Pipelines (Stability Despite Price Uncertainty)' (December 2014);

--'Pipelines, Midstream and MLP Stats Quarterly - Third Quarter 2014' (December 2014);

--'MLP End Game (Common Goals - Divergent Strategies)' (November 2014);

--'Bakken Shale Report (Prolific Production Prompts New Pipelines)' (October 2014);

--'What Investors Want to Know: Pipelines, Midstream and MLPs' (October 2014);

--'Midstream Spending Significantly Rising for MLPs and C-Corps' (August 2014);

--'Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage' (May 2014)';

--'Rating Pipelines, Midstream and MLPs - Sector Credit Factors' (January 2014).

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=980828

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:
Peter Molica, +1-212-908-0288
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Kathleen Connelly, +1-212-908-0290
Director
or
Committee Chairperson
Mark C. Sadeghian, CFA, +1-312-368-2090
Senior Director
or
Alyssa Castelli, +1-212-908-0540
Media Relations, New York
[email protected]
or
Elizabeth Fogerty, +1-212-908-0526
Media Relations, New York
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Lockheed Martin frontrunner for $3.5B Ultra Maritime deal, sources say - FT
• JASIWAY Best-Selling Modern Sleeper Sofa Chair Launches on Wayfair, Bringing Flexible Small-Space Living to Modern American Homes
• Beyond the Credential: As AI Erases the 'Entry-Level Job' and Climate Volatility Accelerates, Planet Classroom Unveils July Lineup Mapping the New Rules of Human Resilience