Fitch Upgrades Williams Partners' IDR to 'BBB': Affirms Williams Cos. at 'BBB-'

NEW YORK--()--Fitch Ratings has upgraded the Issuer Default Ratings (IDRs) and senior debt ratings for Williams Partners L.P. (WPZ) and its affiliates, Williams Partners Finance Corporation (WPFC), Northwest Pipeline LLC (NWP), and Transcontinental Gas Pipe Line Company, LLC (TGPL). WPZ's short-term IDR and commercial paper (CP) rating has been upgraded to 'F2' from 'F3'. In addition, Fitch has affirmed the IDR and debt ratings for The Williams Companies, Inc. (WMB). The Rating Outlook is being revised to Stable from Positive for all companies excluding WMB which remains at Stable.

A full list of ratings appears at the end of this release. Approximately $12.8 billion of long-term debt is affected.

KEY RATING DRIVERS:

Increased scale and diversity: WPZ's upgrade is supported by recently completed acquisitions and ongoing organic growth projects which have increased the scale and diversity of its operations. Most significantly, its 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 its Geismar olefins production facility. WPZ purchased WMB's 83% interest in Geismar in November 2012. The Geismar facility uses ethane as a feedstock, transforming WPZ's commodity exposure from ethane to ethylene. Fitch expects North American ethane-based ethylene margins to continue to be very competitive on a global basis for the next several years.

Also considered is its relationship with WMB, owner of WPZ's general partner (GP) and 64% of its limited partner interests. Asset dropdowns have often been transacted in a manner that has been credit positive for WPZ. On Feb. 28, 2014, WPZ acquired certain WMB Canadian operations, including an oil sands offgas processing plant, an NGL/olefin fractionation facility and butylene/butane splitter facility, and the Boreal pipeline. WPZ funded the transaction with $25 million of cash, an increase in the capital account of WPZ's GP to enable it to maintain its 2% GP interest, and the issuance of a new class of pay-in-kind units that will be convertible to common units at a future date. Also, in May 2013, WMB agreed to waive its rights to up to $200 million of incentive distributions in an effort to support WPZ's growth spending and manage its distribution metrics. The third-quarter cash distributions in 2013 were reduced by $90 million of waived distribution rights. No waiver was utilized with respect to the fourth-quarter distribution and none is anticipated for the first quarter of 2014.

Fourth-quarter 2013 earnings for WPZ and WMB were negatively affected by lost production at its Geismar olefins plant and weak NGL margins. The Geismar plant, which has been shut down due to a fire, is expected to be operational in June 2014. WPZ has $500 million of combined business interruption and property damage insurance that should significantly mitigate the financial loss. Management currently estimates total uninsured losses to be $83 million, $73 million of which occurred in 2013.

TGPL and NWP: TGPL's and NWP's upgrades reflect their strong individual operating and financial profiles, offset by the structural and functional tie between these entities and their parent WPZ. Operationally, TGPL and NWP are considered two of the premier pipeline systems in the U.S. Both pipelines boast competitive rate structures, operate in relatively secure markets, have a high percentage of capacity subscribed under medium- to long-term contracts with utility counterparts, and have manageable expansion plans. Longer-term supply/demand dynamics in the northeast for TGPL and northwest for NWP are favorable. The pipelines' debt-to-EBITDA is expected to remain below 3.0x for the next several years.

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 could approximate 4.0x or below in 2014. WMB's 2014 consolidated debt-to-EBITDA will likely exceed 4.5x, while its parent-level leverage should remain strong at 1.5x or below. 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. At Dec. 31, 2013, WPZ had $225 million of outstanding CP. TGPL and 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. 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. 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 ended 2013 with $681 million of cash and WMB has 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.

TGPL and NWP

--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.

TGPL and NWP

--A downgrade at WPZ.

Fitch upgrades the following ratings with a Stable Outlook:

Williams Partners L.P.

--IDR to 'BBB' from 'BBB-';

--Senior unsecured debt to 'BBB' from 'BBB-';

--Short term IDR to 'F2' from 'F3';

--Commercial paper to 'F2' from 'F3'.

Williams Partners Finance Corporation

--IDR to 'BBB' from 'BBB-';

--Senior unsecured debt to 'BBB' from 'BBB-'.

Transcontinental Gas Pipe Line Company, LLC

--IDR to 'BBB+' from 'BBB';

--Senior unsecured debt to 'BBB+' from 'BBB'.

Northwest Pipeline LLC

--IDR to 'BBB+' from 'BBB';

--Senior unsecured debt to 'BBB+' from 'BBB'.

Fitch affirms the following ratings with a Stable Outlook:

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' Aug. 5, 2013;

--'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.

Applicable Criteria and Related Research:

Funding U.S. LNG Export Facilities (Credit Issues for MLP and Corporate Sponsors)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=716427

Credit Considerations for the GP/LP Relationship

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=721999

Crossover Credits in Natural Resources - Migration Catalysts 2003-2013

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=721741

2014 Outlook: Natural Gas Pipelines

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724977

2014 Outlook: Crude Oil and Refined Products Pipelines

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726461

2014 Outlook: Midstream Services

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726064

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=824098

Contacts

Fitch Ratings
Primary Analyst
Ralph Pellecchia, +1-212-908-0586
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Kathleen Connelly, +1-212-908-0290
Director
or
Committee Chairperson
Philip Smyth, CFA, +1-212-908-0531
Senior Director
or
Media Relations
Alyssa Castelli, +1-212-908-0540 (New York)
alyssa.castelli@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Ralph Pellecchia, +1-212-908-0586
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Kathleen Connelly, +1-212-908-0290
Director
or
Committee Chairperson
Philip Smyth, CFA, +1-212-908-0531
Senior Director
or
Media Relations
Alyssa Castelli, +1-212-908-0540 (New York)
alyssa.castelli@fitchratings.com