S&P: Energy Transfer on watch

S&P said it placed the BB corporate credit rating and other ratings on Energy Transfer Equity LP on CreditWatch with negative implications.

The 4 recovery rating on the senior secured debt is unchanged and indicates 30% to 50% expected default recovery.

The company announced in September that it would merge with the Williams Cos. Inc. The negative watch reflects an expectation that Energy Transfer’s stand-alone financial leverage pro forma for the merger will be considerably weaker than previous expectations, S&P explained.

Energy Transfer’s pro forma stand-alone debt leverage was revised to negative based on an expectation its debt-to-EBITDA will be nearly 7x annualized in 2016, instead of previous expectations of between 3.5x and 4x.

The deal faces both industry and legal headwinds with weaker commodity prices, the agency added.

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