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Rating Action:

Moody's assigns a B1 rating to MarkWest Energy Partners, L.P. $500 million senior notes

19 Oct 2010

Outlook remains stable

New York, October 19, 2010 -- Moody's Investors Service assigned a B1 (LGD4, 65%) rating to MarkWest Energy Partners, L.P. (MarkWest) proposed $500 million senior unsecured notes due 2020. The outlook remains stable. MarkWest will use the proceeds of the note offering to repay the outstanding $375 million of senior notes due in 2014 with the remaining proceeds available for future capital investments in its operations which include natural gas gathering, transmission, and processing.

RATINGS RATIONALE

"The incremental debt modestly increases leverage, however recent financial results and projected cash flow is sufficient to support the increased debt burden at the current Corporate Family Rating, or CFR, of Ba3," said Stuart Miller, Moody's Vice President. "In addition, we take comfort from the partnership's stated intention to continue to issue equity from time to time to fund its rapid expansion."

Since the last rating action on March 29, 2010, the partnership has issued $142 million of common equity, added new producer agreements that include significant acreage dedications, and entered into new strategic arrangements with NiSource Finance Corporation (Baa3, stable) and Sunoco Logistics (Baa2, stable). These steps have strengthened the balance sheet and created the opportunity for cash flow growth. However, the strategic arrangements will require capital investment which will likely lead to borrowings under the partnership's credit facility or more capital market activity in the future.

MarkWest's leverage ratio is one of the more important factors in determining the partnership's debt rating due to the underlying business risk of the partnership. Pro forma for the offering, MarkWest's ratio of debt to EBITDA will increase to 4.2x (using Moody's customary adjustments). Moody's CFR of Ba3 incorporates the steps the partnership has taken to reduce commodity price risk and volume risk through hedging and entering into fee-based service contracts. However, a high level of risk remains, and with the expectation of continuing, significant negative cash flow after capital expenditures and distributions, we believe the current ratings will come under pressure with the incurrence of additional debt if it is not balanced with a corresponding amount of new equity.

To satisfy its liquidity needs, MarkWest relies on its senior secured revolving credit facility. In July 2010, the partnership amended its credit facility by increasing the amount to $705 million and by extending the maturity until July 2015. Pro forma for the new note offering, the entire amount of the facility will be available to fund capital expenditures or distributions to unit holders. Therefore, near term liquidity is more than adequate.

A near term upgrade in the partnership's rating is unlikely given the expectation for negative free cash flow for the foreseeable future coupled with its current leverage ratio. A negative action could result if leverage increases to 5.0x either due to the issuance of additional debt or a fall off in operating performance.

The last rating action affecting MarkWest occurred on March 29, 2010, when Moody's upgraded the CFR and Probability of Default to Ba3 from B1 and upgraded the senior note rating to B1 (LGD4, 62%) from B2 (LGD 4, 65%).

The principal methodology used in rating MarkWest Energy Partners, L.P. was Midstream Energy Companies & Partnerships rating methodology published in September 2007. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

MarkWest Energy Partners, L.P. is headquartered in Denver, Colorado.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service's information.

Moody's Investors Service considers the quality of information available on the issuer satisfactory for the purposes of maintaining a credit rating.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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New York
Stuart Miller
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Wood
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's assigns a B1 rating to MarkWest Energy Partners, L.P. $500 million senior notes
No Related Data.
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