Fitch Places Williams, Williams Partners & Subs on Rating Watch Negative

NEW YORK--()--Fitch Ratings has placed the ratings for The Williams Companies, Inc. (WMB), Williams Partners L.P. (WPZ), and Williams Partners Finance Corporation (WPFC) on Rating Watch Negative. WMB's Issuer Default Rating (IDR) and senior unsecured ratings are 'BBB-'. WPZ's IDR and senior unsecured ratings are 'BBB'. WPFC has a senior unsecured 'BBB' rating. WPZ's pipeline subsidiaries, Northwest Pipeline LLC (NWP), and Transcontinental Gas Pipe Line Company, LLC (TGPL) are on Rating Watch Negative as well. The pipelines both have an IDR and senior unsecured ratings of 'BBB+'.

See the full list of affected ratings at the end of this release. Approximately $23.4 billion of debt is affected.

KEY RATING DRIVERS

Today's rating actions follows Energy Transfer Equity, L.P.'s (ETE) announcement that it will acquire all of the outstanding shares of WMB. WMB shareholders can elect to receive shares in Energy Transfer Corp. LP (ETC), a combination of shares in ETC and cash, or all cash. Debt at WMB is to be assumed by ETE and, once the transaction is complete, Fitch expects to equalize WMB's rating with ETE's. ETE's IDR is 'BB', Rating Watch Positive. WMB's junior subordinated convertible notes are expected to remain two notches below WMB's IDR.

WPZ will remain as a separate standalone master limited partnership (MLP). Its general partner, the incentive distribution rights, and 58.8% of limited partnership units will be owned by ETC and ETE.

Fitch revised WPZ's Outlook to Negative in January 2015 given concerns about the MLP's leverage. In May, WMB announced it would acquire WPZ and that WPZ's leverage would be reduced in part due to future equity issuances. Given Fitch's expectations at that time, the Outlook was revised to Stable. With today's announcement that ETE is to acquire WMB, WMB's prior plan to acquire WPZ has been terminated. The WMB merger is subject to regulatory approvals and a shareholder vote. Fitch will resolve the Rating Watch for WMB, WPZ and its affiliates at or near merger completion, which is expected to occur in the first quarter of 2016.

Fitch is concerned that leverage at WPZ is and will remain high given weakness in commodity prices and WPZ's large-scale capital spending plan. Fitch had previously assumed the combined WMB/WPZ would fund growth with a combination of debt and equity aimed at keeping leverage below 4.5x by year-end 2016. Recent equity price weakness and the newly announced transaction introduces some increased uncertainty into those assumptions. If leverage does not appear to be on a path to fall to 4.5x or lower by year-end 2016, Fitch would consider a Negative Outlook or a one-notch downgrade. WPZ's Outlook could be revised to Stable if Fitch forecasts leverage to trend down to 4.5x or lower on a sustained basis. Rating and/or Outlook revisions at WPZ would result in similar rating actions for NWP, TGPL and WPFC.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for WMB and WPZ include:

--The transaction will close as currently proposed including ETE's assumption of WMB's debt and WMB's revolver being retired;

--WPZ will continue to operate as a standalone MLP with sufficient liquidity;

--WPZ's leverage will be approximately 5x at the end of 2015.

RATING SENSITIVITIES

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

WMB

--Fitch does not expect positive rating action for WMB given plans for its debt to be assumed by lower-rated ETE.

WPZ

--Should leverage or Fitch's expected leverage trend down to 4.5x or lower on a sustained basis, favorable rating action may occur.

TGPL, NWP and WPFC

--Favorable actions would be directly linked to positive rating action at WPZ.

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

WMB

--Fitch expects negative rating action for WMB once its debt is assumed by lower-rated ETE.

WPZ

--Should Fitch forecast leverage of 4.5x or higher on a sustained basis, negative rating action may occur.

--Reduced liquidity or lack of access to capital markets may also result in negative rating action.

TGPL, NWP and WPFC

--Negative actions would be directly linked to WPZ.

LIQUIDITY

As of June 30, 2015, WMB had cash of $204 million on the balance sheet including $186 million of cash which is held at WPZ. WMB has approximately $1.1 billion of availability on its $1.5 billion senior unsecured revolver which extends through 2018.

WPZ had $1.7 billion of commercial paper (CP) outstanding on its $3 billion CP program. It had a $3.5 billion credit facility which was undrawn. After accounting for outstanding CP, WPZ had $1.8 billion of availability on the revolver which matures in 2020.

FULL LIST OF RATING ACTIONS

Fitch has placed the following ratings on Ratings Watch Negative:

The Williams Companies, Inc.

--IDR rated 'BBB-';

--Senior unsecured debt rated 'BBB-';

--Junior subordinated convertible debentures rated 'BB'.

Williams Partners L.P.

--IDR rated 'BBB';

--Senior unsecured debt rated 'BBB';

--Short-term IDR and CP rated 'F2'.

Williams Partners Finance Corporation

--Senior unsecured debt rated 'BBB'.

Transcontinental Gas Pipe Line Company, LLC

--IDR rated 'BBB+';

--Senior unsecured debt rated 'BBB+'.

Northwest Pipeline LLC

--IDR rated 'BBB+';

--Senior unsecured debt rated 'BBB+'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991471

Endorsement Policy

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

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Contacts

Fitch Ratings
Primary Analyst
Kathleen Connelly, +1-212-908-0290
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Peter Molica, +1-212-908-0290
Senior Director
or
Committee Chairperson
Shalini Majahan, +1-212-908-0351
Managing Director
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Kathleen Connelly, +1-212-908-0290
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Peter Molica, +1-212-908-0290
Senior Director
or
Committee Chairperson
Shalini Majahan, +1-212-908-0351
Managing Director
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com