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Rating Action:

Moody's downgrades Williams Partners to Baa3 and Williams Companies to Ba1

07 Jan 2016

Approximately $23 billion of rated debt affected

New York, January 07, 2016 -- Moody's Investors Service (Moody's) downgraded Williams Partners, LP's (WPZ) senior unsecured ratings to Baa3 from Baa2 and the short term rating to Prime-3 from Prime-2. Concurrently, Moody's downgraded the senior unsecured ratings of WPZ's wholly owned pipeline subsidiaries, Northwest Pipeline (Northwest) and Transcontinental Gas Pipeline Company (Transco), to Baa2 from Baa1. The rating outlooks on WPZ and its rated subsidiaries remain negative. Additionally, Moody's downgraded Williams Companies, Inc.'s (Williams) senior unsecured ratings to Ba1 from Baa3 and assigned a Ba1 Corporate Family Rating (CFR), Ba1-PD Probability of Default Rating (PDR) and a SGL-3 Speculative Grade Liquidity (SGL) Rating. The ratings of Williams remain on review for downgrade, pending the completion of its acquisition by Energy Transfer Equity, LP (Ba2 positive).

"The downgrade of Williams, WPZ and the rated pipeline subsidiaries reflects our expectation that the partnership's financial leverage will not decline sufficiently to support its existing ratings as WPZ contends with a more challenging operational environment," said Pete Speer, Moody's Senior Vice President. "The negative outlook highlights the risks to WPZ's forecasted improvements in financial leverage posed by commodity price and customer volume headwinds to its earnings growth and its rising cost of capital."

Downgrades:

..Issuer: Northwest Pipeline GP

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa2 from Baa1

....Senior Unsecured Shelf, Downgraded to (P)Baa2 from (P)Baa1

..Issuer: Transcontinental Gas Pipeline Company, LLC

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa2 from Baa1

....Senior Unsecured Shelf, Downgraded to (P)Baa2 from (P)Baa1

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

....Multiple Seniority Shelf, Downgraded to (P)Ba1 from (P)Baa3; Placed Under Review for further Downgrade

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1 (LGD4) from Baa3; Placed Under Review for further Downgrade

..Issuer: Williams Partners L.P.

....Multiple Seniority Shelf (Local Currency) Feb 24, 2018, Downgraded to (P)Baa3 from (P)Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa3 from Baa2

....Senior Unsecured Commercial Paper, Downgrade to P-3 from P-2

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

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa3 from Baa2

Assignments:

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

.... Probability of Default Rating, Reinstated to Ba1-PD; Placed Under Review for further Downgrade

.... Speculative Grade Liquidity Rating, Reinstated to SGL-3

.... Corporate Family Rating, Reinstated to Ba1; Placed Under Review for further Downgrade

Outlook Actions:

..Issuer: Northwest Pipeline GP

....Outlook, Remains Negative

..Issuer: Transcontinental Gas Pipeline Company, LLC

....Outlook, Remains Negative

..Issuer: Williams Partners L.P.

....Outlook, Remains Negative

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

....Outlook, Rating under Review

RATINGS RATIONALE

WPZ's Baa3 rating is supported by its rising cash flows coming from organic growth capital projects that are supported by contractual cash flows. This provides visibility for continued declines in financial leverage in 2016, with Debt/EBITDA expected to decline below 5x by the end of 2016. The Baa3 rating is also supported by management's ability to defer and reduce capital spending, adjust its distributions and thereby mitigate its financing requirements to support WPZ's investment grade rating. WPZ owns a 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 assets.

The negative outlook for WPZ and its rated pipeline subsidiaries reflects the inherent volume risk in its gathering and processing (G&P) assets and the stress faced by exploration and production companies in this low commodity price environment. While a substantial portion of its G&P business is supported by long-term contracts that have minimum volume commitments or other contractual terms to mitigate volume risks, WPZ has a high level of customer concentration risk with Chesapeake Energy (B2 negative). These challenges could cause earnings growth to fall below expectations and result in higher financial leverage.

If WPZ can lower Debt/EBITDA below 5x and soundly increase its distribution coverage above 1x then the outlook could be changed to stable. WPZ's ratings could be downgraded if Debt/EBITDA remains above 5x or if its distribution coverage stays below 1x. An upgrade is unlikely in 2016 given the fundamental business challenges. In order to be considered for an upgrade to Baa2, WPZ would have to reduce its Debt/EBITDA towards 4x and increase its distribution coverage above 1.2x absent a meaningful decrease in its direct commodity risk or volume risk exposure.

Williams' Ba1 senior unsecured rating incorporates its control of WPZ and access to much of the cash flows generated by the partnership's asset base because of its ownership of the general partner interest and about 58% of the limited partner interests in WPZ. The rating also reflects the structural subordination of Williams' creditors to the debt at WPZ and the limited amount of unencumbered assets at the parent company. The Williams' rating is only one notch below the WPZ rating because of the low proportion of debt at Williams relative to the consolidated company and the expectation that its leverage on a parent company only basis will be kept relatively low.

Williams' ratings continue to remain on review for downgrade due to the pending combination of Williams with lower rated Energy Transfer Equity, L.P. (ETE). Moody's expects to equalize ETE's and Williams' debt ratings post completion of the announced combination as we expect Williams' and ETE's debt to be pari passu. Moody's expects to conclude Williams' review for downgrade when the transaction closes, which ETE expects to occur in the first half of 2016, and is subject to shareholder and regulatory approvals.

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. 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. However, their ratings have been limited to one notch above WPZ's ratings to reflect the partnerships dependence on their cash flows to support its own debt service requirements and distributions. Given this tight connection with WPZ, any downgrade or upgrade of WPZ is likely to result in a commensurate downgrade or upgrade of Transco and Northwest.

WPZ's Prime-3 rating reflects its Baa3 rating and our expectation that the partnership will maintain adequate liquidity primarily because of its $3.5 billion senior unsecured credit facility that matures in February 2020 and provides for working capital needs and short-term borrowing capacity to fund growth capital expenditures. Like most MLPs, the partnership has historically relied on funding its growth capital expenditures through a mix of equity and debt capital markets issuances. WPZ has some flexibility to reduce its capital expenditures and it can adjust distributions to reduce some of its external funding requirements as capital markets conditions warrant.

Williams SGL-3 rating reflects its adequate parent company liquidity primarily based on its $1.5 billion committed revolving credit facility. While the company has some capital expenditures to fund related to its wholly-owned Canadian operations, Moody's expects Williams to maintain substantial available borrowing capacity to manage its liquidity needs and that the company will modify its dividends in line with any potential changes in distributions at WPZ.

The principal methodology used in these ratings was Global Midstream Energy published in December 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Williams, is headquartered in Tulsa, Oklahoma and through its subsidiaries is primarily engaged in the gathering, processing and interstate transportation of natural gas. Currently, Williams owns the GP interest and a substantial portion of the LP interests in WPZ, a publicly traded midstream energy master limited partnership (MLP). Northwest Pipeline and Transcontinental Gas Pipeline Company are major interstate natural gas pipelines that are wholly owned subsidiaries of WPZ.

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 downgrades Williams Partners to Baa3 and Williams Companies to Ba1
No Related Data.
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