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Moody's reviews Atlas for upgrade
Moody's Investors Service said it placed Atlas Pipeline Partners, LP's and Atlas Energy, LP's ratings on review for upgrade including Atlas Pipeline’s B1 corporate family rating, B1-PD probability of default rating and B2 (LGD4) senior bonds and Atlas Energy’s B3 corporate family rating, B3-PD probability of default rating and B3 (LGD4) senior secured credit facility.
At the same time, the agency affirmed Targa Resources Partners LP's Ba1 corporate family rating, Ba1-PD probability of default rating, Ba2 (LGD4) senior note rating and SGL-3 speculative grade liquidity rating. Its outlook remains positive.
Targa and its general partner, Targa Resources Corp., have agreed to acquire Atlas Pipeline and Atlas Energy, respectively, for about $7.7 billion. Atlas Energy is Atlas Pipeline's general partner. Targa will assume about $1.8 billion of Atlas Pipeline debt and borrow an additional $200 million to cover transaction fees and one-time cash payments to Atlas Pipeline unitholders. Targa Resources Corp. will take on $865 million of incremental debt to acquire Atlas Energy.
"The acquisition of Atlas Pipeline will significantly boost Targa's scale, geographic diversity and growth prospects and position the combined entity as one of the premiere midstream service providers in the Permian Basin," Arvinder Saluja, a Moody's assistant vice president, said in an agency news release.
"While Targa's consolidated leverage (including new debt issued at TRC) will increase to 4.3x based on projected 2015 EBITDA and there are inherent integration and execution risks associated with an acquisition of this size, we believe there will be significant organic growth and synergy opportunities over the next 12 to 18 months that will help reduce leverage and maintain the positive rating momentum."
The review of Atlas Pipeline's and Atlas Energy's ratings reflects their acquisition by a higher rated company, the agency said.
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