Moody's may downgrade Regency Energy

Moody's Investors Service said it placed the ratings of Regency Energy Partners LP under review for possible downgrade following the company's announcement that it agreed to acquire CDM Resource Management, Ltd. for $655 million.

Ratings under review are the Ba3 corporate family and probability-of-default ratings, SGL-3 speculative-grade liquidity rating and B1 (LGD5, 79%) senior unsecured regular bond rating.

This news follows Regency's announcement earlier this week that it would acquire FrontStreet Hugoton LLC from its general partner sponsor GE Energy Financial Services for $139 million. Moody's said the review reflects uncertainties as to whether Regency will realize the cash flows incorporated in its valuations, particularly in regards to CDM, which represents an entree into the natural gas compression services business and roughly doubles Regency's debt.

The agency expects to conclude the review in January, when Regency plans to close the two acquisitions upon receipt of the requisite regulatory approvals and acquisition bridge financing.

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