Following the announcement that Williams Cos. Inc. plans to roll up Williams Partners LP in a $10.5 billion simplification deal, S&P Global Ratings on May 17 placed the natural gas processing and transportation giant on CreditWatch positive.
The rating agency placed its BB+ corporate credit and senior unsecured debt ratings for Williams on CreditWatch positive and affirmed its investment-grade BBB corporate credit and senior unsecured ratings on Williams Partners and its subsidiaries. BB+ is S&P Global Ratings' highest speculative-grade rating.
Williams announced May 17 that it plans to acquire all of Williams Partners' remaining outstanding public common units at a ratio of 1.494 Williams common shares for every unit of Williams Partners. The company was expected to green-light the transaction after the Federal Energy Regulatory Commission's March 15 decision to eliminate oil and gas pipeline MLPs' ability to recover an income tax allowance in their cost-of-service rates.
S&P Global Ratings said the simplification could improve Williams' capital markets access through the commodity cycle. The agency also expects the benefits of the simpler corporate structure to be offset by a weaker financial risk profile. "After [Williams] eliminated incentive distribution rights and boosted its distribution coverage in March 2017, we believe its acquisition of [Williams Partners] is the next step in the company's progression to sustainable growth," the rating agency said in its May 17 release.
S&P Global Ratings expects to raise its rating on Williams to BBB, two notches into investment grade, with a negative outlook upon completion of the transaction.
Along with an affirmation of its BBB rating on Williams Partners, S&P Global Ratings revised its outlook to negative for the partnership, saying it expects the combined credit measures of Williams and the partnership to be stretched under the current rating.
Also on May 17, Moody's and Fitch Ratings said they are considering Williams for upgrades into investment-grade status.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.