Fitch Affirms Enterprise Products and Enterprise GP Holdings; Outlooks Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the outstanding ratings for Enterprise Products Operating LLC (EPO), Enterprise GP Holdings L.P. (EPE), and TEPPCO Partners L.P. (TPP) as follows:

EPO

--Issuer Default Rating (IDR) at 'BBB-';

--Senior unsecured at 'BBB-';

--Junior subordinated at 'BB'.

EPE

--IDR at 'BB-';

--Senior secured revolving credit facility at 'BB';

--Senior secured term loans at 'BB'.

TPP

--IDR at 'BBB-';

--Senior unsecured at 'BBB-';

--Junior subordinated at 'BB'.

The Rating Outlook is Stable for each issuer. The rating action relates to approximately $13.2 billion of total debt at the entities.

EPO is the operating partnership for Enterprise Partners L.P. (NYSE:EPD), the largest publicly traded master limited partnership (MLP) with a current enterprise value of approximately $32 billion. EPE is the publicly traded owner of EPD's general partner and approximately 3.3% of its limited partner interests. EPE also owns both general and limited partner interests in Energy Transfer Equity, L.P. (ETE; IDR 'BB-' with a Stable Outlook). TPP is a wholly owned subsidiary of EPO that was acquired in October 2009. Only $54 million in TPP senior and subordinated debt remains outstanding following an exchange offer for EPO debt at the time of the acquisition. Given the current ownership structure TPP's debt is rated the same as EPO's debt. Enterprise Products Company (formerly known as EPCO, Inc.) indirectly owns EPE's general partner interest, 78% of its limited partner interests and 27% of EPD's limited partner interests.

EPO's ratings and Stable Outlook are supported by the quality and diversity of its sizable asset base and the resulting cash flow performance, as reflected in strong results in 2009 despite weak natural gas and natural gas liquids (NGLs) prices. EPO maintains a high-quality, diversified midstream asset base, which permeates most major domestic gas producing basins and is complemented by offshore activities, significant gathering and processing operations and large-scale transportation assets. EPO significantly enhanced its refined products operating base through the acquisition of TPP. The company continues to increase the fee-based component of its earnings while attempting to mitigate its commodity price exposure through an active hedging program.

Additional favorable characteristics for EPO include:

--conservative distribution practices at EPD which directly resulted in the retention of approximately $256 million of excess distributable cash flow for the first half of 2010;

--a continuation of supportive ownership following the passing of Dan Duncan, as most recently demonstrated by the purchase of EPD common units by the Duncan family owned Enterprise Products Company;

--beneficial industry trends in the pricing relationship of natural gas to crude oil, the growing utilization of NGLs by the petrochemical industry as feedstock for ethylene production, and the movement of natural gas production activity to liquids rich producing basins such as the Eagle Ford Shale play where EPO is well positioned.

Credit concerns for EPO include:

--an aggressive growth strategy with targeted capital expenditures of approximately $3 billion in 2010;

--exposure to commodity prices despite an active hedging program that limits volatility of NGL margins over the near term but which is limited in its ability to effectively hedge longer term;

--modest exposure to reduced oil and gas offshore volumes resulting from the uncertainty caused by the federal drilling moratorium.

Fitch expects EPD's consolidated Debt to EBITDA, assuming 75% equity treatment for the EPO and TPP subordinated notes, to approximate 3.8 times (x) in 2010 and to increase modestly in 2011. Absent material capital spending beyond current expectations, leverage ratios should improve beginning in 2012 as ongoing projects become operational and generate cash returns. The company's liquidity position is strong. There are currently no borrowings outstanding under EPO's $1.75 billion credit facility that matures in November 2012.

EPE's ratings and Stable Outlook are supported by the diverse and stable cash flows from the underlying asset base, the benefits of receiving both limited partner and general distributions and ownership's long track record of financially supporting the Enterprise entities. The debt at EPE is serviced by cash flows from sizable and diverse midstream MLPs. Through these interests, EPE is exposed to every phase of the midstream energy business as well as a sizable propane distribution portfolio. The underlying MLP ratings reflect the strength of each partnership's balance sheet as well as the size, quality and market position of the respective asset bases.

Credit concerns for EPE include: EPE's lack of direct ownership of operating assets; the subordination of EPE's debt to debt at the MLP's; and refinancing risk as its outstanding debt matures in 2012 and 2014.

EPE's debt leverage, as measured by the cash distributions it receives less operating expenses to debt, continues to strengthen as cash flows increase with the growth of the underlying MLPs. Debt to EBITDA for 2009 was 3.1x and absent EPE incurring additional debt leverage should approach 2.0x in 2012 as several large ongoing projects at EPD and ETP become operational and expect to generate incremental upstream cash.

Applicable Criteria available at www.fitchratings.com include:

--'Rating Master Limited Partnerships' (Feb. 12, 2008);

--'Issuer Default Ratings and Recovery Ratings in the Power and Gas Sector' (Nov. 7, 2005);

--'U.S. Power and Gas Comparative Risk (COR) Evaluation and Financial Guidelines' Aug. 22, 2007).

Additional information is available at www.fitchratings.com.

Related Research:

Rating Master Limited Partnerships

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=371982

Issuer Default Ratings and Recovery Ratings in the Power and Gas Sector

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=254848

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