Moody's affirms Colonial Pipeline

Moody's Investors Service said it affirmed the existing ratings of Colonial Pipeline Co. including the A2 assigned to all senior unsecured debt and the P-1 short-term rating.

The outlook is stable.

The agency said Colonial's ratings reflect the company's strong and stable cash flows, supported by competitive tariffs and delivery costs, a strong market position and relatively inelastic product demand.

The ratings also consider the company's highly leveraged capital structure (from a GAAP perspective) and history of high dividend payouts, Moody's said. The dividend payout was 105% in 2009 and has averaged 99% for the past three years, and the company's ratio of debt to EBITDA for the 12 months ended June 30 was 2.2 times.

The agency said the affirmation also considers its view that the recently announced acquisition of Chevron Corp.'s 23.44% interest in Colonial by Kohlberg Kravis Roberts & Co. LP and the National Pension Service of Korea will have little near-term credit impact on Colonial's rating. It is Moody's understanding that Chevron will continue to be a customer on the Colonial system and that the pipeline's current corporate governance practices and oversight by the Federal Energy Regulatory Commission will remain unchanged.

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