Moody's rates PNG notes Baa3

Moody's Investors Service said it assigned a Baa3 senior secured rating to the $411 million senior secured notes issued by PNG Cos. LLC.

The outlook is stable.

Proceeds from the notes and from a $68 million bank term loan executed by direct parent company LDC Holdings Co. are being used to replace a substantial portion of the equity contribution made by SteelRiver Infrastructure Fund North America LP, which funded the acquisition of Peoples Natural Gas from Dominion Resources, Inc. for consideration of around $780 million. Following this debt issuance, Moody's calculates SteelRiver's equity contribution in PNG to be about $330 million.

The agency said the Baa3 rating reflects the relatively low business risk associated with Peoples' LDC operations; the relatively predictable and average credit supportive regulatory environment in Pennsylvania, which allows cost and investment recovery on a reasonably timely basis; and PNG's adequate liquidity profile.

The rating is constrained by the substantial consolidated leverage incurred in connection with the change of ownership and the flexibility embedded in the notes for PNG and Peoples to incur additional debt, Moody's said.

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