Moody'son March 29 downgraded Targa ResourcesPartners LP's corporate family rating, or CFR, to Ba2 from Ba1, itssenior unsecured notes ratings to Ba3 from Ba2, and its preferred unit rating toB1 from Ba3.
Moody'supgraded Targa Resources Corp.'sCFR to Ba2 from Ba3, and downgraded its senior secured credit facility rating toB1 from Ba3. Targa's SGL-3 speculative grade liquidity rating was affirmed, reflectingadequate liquidity through at least early 2017. The rating review on the companywas initiated Nov. 3, 2015, when it announced its agreement to purchase all the outstanding common units ofthe partnership.
The outlookwas changed to negative, based on the potential for further downside earnings riskfrom the company's percent-of-proceeds contracts and other contracts that entailcommodity and producer volume exposures.
The company's increasedgeographic diversification and improved business diversification have been temperedby, among other things, the material exposure to the gathering and processing businessas well as the continued weakness in NGL markets, Moody's said.
"Althoughthe acquisition of [Targa Resources Partners] by [Targa] simplifies the corporatestructure and potentially reduces the combined company's cost of capital over thelong term, the weak commodity price environment will reduce earnings and keep financialleverage higher than previously anticipated despite the recent preferred stock issuance,"Moody's Senior Analyst Arvinder Saluja said.