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Rating Action:

Moody's affirms Williams' ratings; Access Midstream ratings on review for upgrade

16 Jun 2014

Approximately $16.5 billion of rated debt affected

New York, June 16, 2014 -- Moody's Investors Service affirmed The Williams Companies, Inc.'s (Williams) Baa3 senior unsecured ratings, Williams Partners, LP's (WPZ) Baa2 senior unsecured ratings and the Baa1 ratings of WPZ's wholly owned pipeline subsidiaries, Northwest Pipeline (Northwest) and Transcontinental Gas Pipeline Company (Transco). Moody's placed on review for upgrade Access Midstream Partners, L.P.'s (ACMP) Ba1 Corporate Family Rating (CFR) and Ba2 senior notes ratings. The rating outlook for Williams, WPZ and its pipeline subsidiaries remains stable.

These rating actions follow Williams' announcement that it has agreed to purchase the remaining 50% interest in ACMP's general partner (GP) and 55.1 million limited partner (LP) units in ACMP from Global Infrastructure Partners (GIP, unrated) for $5.995 billion. The company has also proposed a merger of WPZ and ACMP to be completed later in 2014.

"Williams' Baa3 ratings were affirmed because we expect the company's consolidated and parent company only financial leverage to decline from presently high levels over the remainder of 2014 and 2015 through earnings growth from capital projects coming online," said Pete Speer, Moody's Senior Vice-President. "The sound strategic fit of the acquisition also supported Williams Baa3 ratings."

"The merger of Williams Partners and Access Midstream supports WPZ's Baa2 ratings by improving its business risk profile and distribution coverage and lowering its currently high financial leverage," continued Speer. "Access Midstream's creditors benefit from the combined partnership's increased scale and broader business line and customer diversification."

RATINGS RATIONALE

Williams' Baa3 senior unsecured rating is supported by its control of WPZ and ACMP and access to most of the cash flows generated by those partnerships' high quality pipeline and midstream assets. Williams initial pro forma consolidated debt/EBITDA following the acquisition from GIP would be about 6x, and parent only debt/EBITDA would approach 2.5x, both well above levels consistent with the company's Baa3 ratings. However, Moody's expects leverage to trend down over the remainder of 2014 and 2015 to less than 5x and 2x, respectively, as the many growth projects in progress at WPZ and ACMP are completed and drive earnings growth.

Williams plans to fund the acquisition of GIP's ownership interests in ACMP approximately half with equity and the remainder with a combination of long-term debt, revolver borrowings and cash on hand. This transaction increases Williams' financial leverage, despite the substantial equity funding, because of the very high multiple being paid relative to incremental distributions and EBITDA. Following the transaction, Williams will fully control ACMP through 100% ownership of the GP, and it will own about 50% of ACMP's LP interests. This is beneficial to Williams' overall consolidated business risk profile because of ACMP's fee-based revenues and significant contractual mitigation of volume risk.

ACMP has gathering assets and processing facilities that are complimentary to WPZ's assets in the rapidly growing Marcellus and Utica shale while also providing exposure to other basins. The partnership has visible growth projects, strong operational execution and declining financial leverage. Williams existing knowledge of ACMP reduces some of the inherent performance risk of this acquisition and the strategic asset alignment counterbalances some of the near term concerns regarding Williams' financial leverage and the acquisition's valuation.

WPZ's Baa2 senior unsecured rating reflects its large asset base and the stability of its regulated interstate pipeline operations, tempered by the significant amount of commodity price and volume risk in its midstream operations. The proposed merger of WPZ with ACMP, if completed, would result in a larger entity with a lower business risk profile. ACMP's customer concentration risk with Chesapeake Energy (Ba1 stable) is significantly diluted given its combination with WPZ's larger and more diversified customer base. The proposed merger also significantly improves WPZ's leverage metrics and distribution coverage, which are presently weak for its Baa2 ratings. The simplification of the organizational structure and enhanced operational synergies between WPZ and ACMP are credit positive to the overall consolidated credit profile of Williams, but those benefits accrue directly to the merged WPZ/ACMP. Substantially all of the incremental debt from the two transactions will be issued by Williams, limiting the leveraging effect of the transactions to the parent company.

The closing of the acquisition of GIP's ownership interests in ACMP is subject only to the receipt of regulatory approvals under provisions of the Hart-Scott-Rodino Act. It is not contingent on the proposed merger of WPZ and ACMP. The proposed terms of the merger between WPZ and ACMP will be subject to negotiation, review and approval by conflicts committees of each partnership's board of directors. Williams also expects the proposed merger to be subject to approval by WPZ's unitholders.

The merger of WPZ and ACMP has been proposed by Williams as an exchange of new ACMP LP units for all outstanding WPZ LP units with a small cash component to WPZ unitholders. The outstanding debt of WPZ is expected to be assumed by ACMP, resulting in the combined entity's debt being pari passu. Moody's ratings review for ACMP will focus on the final terms of the transaction and outlook for the combined entities financial performance. The review for upgrade of ACMP's ratings and the affirmation of WPZ's Baa2 ratings reflects Moody's view that the combined entity is likely to be rated Baa2 following the merger based on the proposed terms.

The stable outlook for Williams presumes successful execution of its long term funding plans for the acquisition of ACMP. The stable outlook for Williams and also WPZ is based on Moody's expectation that both entities consolidated financial leverage metrics will decline over the remainder of 2014 and 2015 as new growth projects commence operations and increase cash flows. This should also drive improving parent company only leverage at Williams. If the execution on growth projects does not meet expectations then the ratings could be pressured. Debt/EBITDA at WPZ sustained above 4.5x could result in a ratings downgrade. If Williams' consolidated debt/EBITDA and parent company only debt/EBITDA does not decline as expected to under 5x and 2x, respectively, then its ratings could be downgraded.

Rating Actions:

On Review for Possible Upgrade:

..Issuer: Access Midstream Partners, L.P.

.... Probability of Default Rating, Placed on Review for Upgrade, currently Ba1-PD

.... Corporate Family Rating, Placed on Review for Upgrade, currently Ba1

....Subordinate Shelf, Placed on Review for Upgrade, currently (P)Ba3

....Senior Unsecured Shelf, Placed on Review for Upgrade, currently (P)Ba2

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Upgrade, currently Ba2

Affirmations:

..Issuer: Access Midstream Partners, L.P.

.... Speculative Grade Liquidity Rating, Affirmed SGL-2

..Issuer: Northwest Pipeline GP

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa1

....Senior Unsecured Shelf, Affirmed (P)Baa1

..Issuer: Transcontinental Gas Pipeline Company, LLC

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa1

....Senior Unsecured Shelf, Affirmed (P)Baa1

..Issuer: Williams Companies, Inc. (The)

....Preferred Shelf, Affirmed (P)Ba2

....Subordinate Shelf, Affirmed (P)Ba1

....Senior Unsecured Shelf, Affirmed (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

..Issuer: Williams Partners LP

....Senior Unsecured Shelf, Affirmed (P)Baa2

....Senior Unsecured Commercial Paper, Affirmed P-2

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Access Midstream Partners, L.P.

....Outlook, Changed To Rating Under Review From Positive

..Issuer: Northwest Pipeline

....Outlook, Remains Stable

..Issuer: Transcontinental Gas Pipeline Company

....Outlook, Remains Stable

..Issuer: Williams Companies, Inc. (The)

....Outlook, Remains Stable

..Issuer: Williams Partners LP

....Outlook, Remains Stable

The principal methodology used in rating Access Midstream Partners, L.P., Williams Companies, Inc. (The), and Williams Partners LP was Global Midstream Energy published in December 2010. The principal methodology used in rating Northwest Pipeline GP and Transcontinental Gas Pipeline Company, LLC was Natural Gas Pipelines published in November 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Williams Companies, Inc. is headquartered in Tulsa, Oklahoma and through its subsidiaries is primarily engaged in the gathering, processing and interstate transportation of natural gas. Williams owns the GP interest and a substantial portion of the LP interests in Williams Partners, LP, a publicly traded midstream energy master limited partnership (MLP). Access Midstream Partners, L.P. is a publicly traded midstream energy MLP that is headquartered in Oklahoma City, Oklahoma.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Speer
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Williams' ratings; Access Midstream ratings on review for upgrade
No Related Data.
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