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Rating Action:

Moody's changes Williams Partners' and Williams' rating outlooks to positive

Global Credit Research - 13 Sep 2017

Approximately $21 billion of rated debt affected

New York, September 13, 2017 -- Moody's Investors Service, ("Moody's") changed Williams Partners, LP's (WPZ) and its wholly owned pipeline subsidiaries', Northwest Pipeline (Northwest) and Transcontinental Gas Pipeline Company (Transco), rating outlooks to positive from stable. Moody's also changed The Williams Companies' (Williams) rating outlook to positive from stable.

Additionally, Moody's affirmed the Baa3 senior unsecured rating and the Prime-3 short term rating of WPZ and the Baa2 senior unsecured ratings of Northwest and Transco. Williams' Ba2 Corporate Family Rating (CFR) was also affirmed. Williams' Speculative Grade Liquidity (SGL) Rating was upgraded to SGL-2 from SGL-3.

"The change in outlook to positive reflects the culmination of several steps completed by management this year to strengthen WPZ's credit profile, lower its business risk and improve its operational execution and earnings predictability," commented Pete Speer, Moody's Senior Vice President. "If the partnership can continue its strong execution on growth projects while maintaining its lower financial leverage and good distribution coverage, the ratings could be upgraded in 2018."

Affirmations:

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

.... Probability of Default Rating, Affirmed Ba2-PD

.... Corporate Family Rating, Affirmed Ba2

....Multiple Seniority Shelf, Affirmed (P)Ba2

....Senior Unsecured Regular Bond/Debentures, Affirmed Ba2

..Issuer: Williams Partners L.P.

....Multiple Seniority Shelf, Affirmed (P)Baa3

....Senior Unsecured Commercial Paper, Affirmed P-3

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

..Issuer: Williams Partners L.P. (Old)

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

..Issuer: Northwest Pipeline GP

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

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

..Issuer: Transcontinental Gas Pipeline Company, LLC

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

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

Upgrades:

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

.... Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3

Outlook Actions:

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

....Outlook, Changed To Positive From Stable

..Issuer: Williams Partners L.P.

....Outlook, Changed To Positive From Stable

..Issuer: Northwest Pipeline GP

....Outlook, Changed To Positive From Stable

..Issuer: Transcontinental Gas Pipeline Company, LLC

....Outlook, Changed To Positive From Stable

RATINGS RATIONALE

WPZ's positive outlook reflects the partnership's strengthened financial profile following the sale of its Geismar ethylene plant and application of proceeds to debt reduction. This transaction follows a series of steps taken by management this year, including the beginning of year distribution cut and IDR elimination that restored sound distribution coverage, all of which demonstrate management's and the board of directors' commitment to maintaining stronger credit metrics. Pro forma for the Geismar sale, WPZ's June 30, 2017 Debt/EBITDA was below 4x.

WPZ has also been delivering more consistent financial performance and capital project execution over the past year. The partnership has several large capital projects in process and will have higher growth capital spending in 2018, which will cause a modest increase in financial leverage in 2018 because the negative free cash flow will be debt funded. However, with continued solid project execution this elevation in leverage should be short-lived with leverage ending 2018 around 4.3x and declining to 4x or lower thereafter. The positive outlook for WPZ and the entire Williams' family of companies is further supported by Moody's expectation of a steady decline in Williams' parent company debt levels through 2019 funded through free cash flow at the parent company.

In order to be upgraded to Baa2, WPZ has to continue to execute on its large capital projects and sustain its Debt/EBITDA around 4x and its distribution coverage around 1.2x, while reducing its business risk by lowering its volume risks and avoiding direct commodity price risk. Williams' family leverage (Williams consolidated Debt/EBITDA) declining towards 5x would also be supportive of an upgrade. A ratings upgrade of WPZ would likely result in an upgrade of Williams, Transco and Northwest, assuming that their standalone credit profiles remain relatively constant or strengthen.

WPZ's ratings could be downgraded if Debt/EBITDA rises above 5x or if distribution coverage falls below 1x on a sustained basis. The partnership's ratings could also be negatively affected by a significant increase in debt levels at Williams. A downgrade of WPZ is likely to result in a downgrade of Williams, Transco and Northwest. Williams' ratings could also be downgraded if Williams' parent company only leverage were to increase and be sustained above 4x.

WPZ's Baa3 senior unsecured rating and Prime-3 short term rating are supported by its large and geographically diversified asset base that is underpinned by the stability of its regulated interstate pipeline operations and largely fee based gathering and processing (G&P) assets. The partnership has rising cash flows coming from organic growth capital projects that are primarily interstate pipeline related and are supported by contractual commitments. The rating also incorporates the inherent volume risk in the G&P business, which remains vulnerable to periods of weak natural gas and natural gas liquids prices and corresponding declines in customer drilling activity. WPZ still has some customer concentration risk with Chesapeake Energy (Chesapeake, Caa1 positive), but that exposure has been reduced.

Williams' Ba2 CFR incorporates its control of WPZ. Williams has access to much of the cash flows generated by WPZ's asset base of high quality pipeline and midstream assets because of its large ownership interest in the limited partner (LP) units of WPZ. The rating also reflects the structural subordination of Williams' creditors to the debt at WPZ and that Williams has no meaningful unencumbered operating assets at the parent company. Williams' rating is two notches beneath the WPZ Baa3 rating reflecting this structural subordination, the meaningful amount of third party LP ownership in WPZ, and its leverage on a parent company only basis.

The senior unsecured ratings of WPZ's wholly owned pipeline subsidiaries, Transco and Northwest, are Baa2, or one notch above WPZ's rating, reflecting WPZ's controlling ownership and the pipelines importance to the partnership's debt service and distribution capacity. The pipelines' debts are not guaranteed by WPZ or Williams, and the pipelines do not guarantee any of WPZ's or Williams' debts. Both pipelines' ratings reflect the regulated nature of their operations, their supply diversity and growth potential. The pipelines also benefit from low standalone financial leverage and strong interest coverage. On a standalone basis, each pipeline's credit profile could support a higher rating. However, their ratings have been limited to one notch above WPZ's rating to reflect the partnership's dependence on their cash flows to support its own debt service requirements and distributions.

Moody's expects WPZ to maintain good liquidity because of the availability on its $3.5 billion committed senior unsecured credit facility that matures February 2020 and the Geismar asset sales proceeds. At June 30, 2017, WPZ had $1.9 billion of cash and full availability under its credit facility with good headroom for future covenant compliance. The large cash balance reflected Williams' $1.45 billion debt issuance in June 2017 which funded the July 2017 early redemption of $1.4 billion senior notes due 2023. With additional proceeds from the Geismar sale in excess of the term loan repayment in July 2017, the cash balance and available borrowing capacity provides funding capacity through 2018 for planned capital expenditures, distributions and any working capital needs.

Williams SGL-2 rating reflects its good parent company liquidity based on availability under its $1.5 billion committed revolving credit facility that matures in February 2020. As of June 30, 2017, Williams had $955 million of available borrowing capacity under its credit facility and ample headroom for future covenant compliance. The company has paid down outstanding borrowings since the beginning of 2017 from free cash flow, which Moody's expects to continue. The parent company has no meaningful capital expenditure requirements and could sell WPZ LP units to raise cash.

The principal methodology used in rating Williams Companies, Inc. (The), Williams Partners L.P., and Williams Partners L.P. (Old) was Midstream Energy published in May 2017. The principal methodology used in rating Northwest Pipeline GP and Transcontinental Gas Pipeline Company, LLC was Natural Gas Pipelines published in November 2012. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Williams, is headquartered in Tulsa, Oklahoma and through its subsidiaries is primarily engaged in the gathering, processing and interstate transportation of natural gas. Williams owns a substantial portion of the LP interests in WPZ, a publicly traded midstream energy MLP. Northwest and Transco are major interstate natural gas pipelines that are wholly owned subsidiaries of WPZ. There are no guarantees provided between any of the rated entities.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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: 1 212 553 0376
Client Service: 1 212 553 1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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