Fitch Rates Energy Transfer Partners Sr. Unsecured Notes Offering 'BBB-'

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

KEY RATING DRIVERS

Increased Size, Scale and Diversity: Recent 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 closed merger between ETP and Regency Energy Partners, LP (RGP) is expected to provide ETP with increased cash flows driven by expected synergies and improved returns on growth projects previously planned at RGP. 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. With ETP's merger with RGP and its interests in Sunoco, LP (SUN; rated 'BB'/Stable Outlook by Fitch) and Sunoco Logistics LP (SXL; 'BBB'/Stable Outlook), ETP's operating assets and retail platform provide further diversified geographic and business line exposure and a major platform for growth within most of the major U.S. production regions.

Moderate Leverage Metrics: Fitch expects ETP's adjusted consolidated debt/EBITDA should range between 4.0x to 4.5x in both 2015 and 2016. If leverage were to be meaningfully above 4.5x on a sustained basis, Fitch would likely take a negative rating action.

Modest Commodity Price Exposure: Pro-forma for the merger, ETP expects that roughly 85% to 87% of its cash flows are fee based for 2015. As such, expectations are that cash flows remain relatively stable even in the current weak commodity price environment.

Other Rating Considerations: ETP's structural subordination to subsidiary debt and uncertainties resulting from potential future structural changes are also considered. The potential effect on pipeline system utilization and related re-contracting risk resulting from changing natural gas supply dynamics is a longer-term concern.

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 $70/barrel; and Henry Hub gas that trends up from $3/mcf in 2015 to a long-term price of $3.75/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:

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

--Reduced consolidated 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:

--Weakening credit metrics with ETP leverage above 5.0x on a sustained basis would likely lead to a downgrade to BB+;

--Increasing commodity price exposure above 30% could lead to a negative ratings action.

LIQUIDITY

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 31, 2015, ETP had no borrowings under the credit facility. On April 30, 2015 ETP borrowed $1.5 billion to partially repay the RGP credit facility. The bank agreement 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 permitted acquisitions leverage can temporarily increase to 5.5x. ETP is currently in compliance with this covenant.

Fitch's ratings for ETP are as follows:

Energy Transfer Partners, LP

--IDR 'BBB-';

--Senior unsecured debt 'BBB-';

--Junior subordinated debt 'BB'.

The Rating Outlook is Stable.

Date of Relevant Rating Committee: 30 April 2015

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=986623

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=986623

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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View source version on businesswire.com: http://www.businesswire.com/news/home/20150618005954/en/

Fitch Ratings
Primary Analyst
Peter Molica
Senior Director
+1-212-908-0288
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Kathleen Connelly
Director
+1-212-908-0290
or
Committee Chairperson
Robert Curran
Managing Director
+1-212-908-0515
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: [email protected]

Source: Fitch Ratings

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