S&P lifts Regency Gas

Standard & Poor's said it raised its corporate credit rating on Regency Gas Services LP to BB- from B+ and affirmed the B rating on Regency Energy Partners LP's senior unsecured notes due 2013. All of the ratings were removed from CreditWatch with positive implications, where they were placed on July 24.

The issuer has a $250 million revolving credit facility bank loan due 2011 and $50 million term B bank loan due 2013 rated BB.

The outlook is stable.

The rating actions reflect the favorable credit implications expected from ownership by GE Energy Financial Services and the de-leveraging effect of the company's equity issuance in July. The rating on the unsecured notes remains the same, due to the double notching effect of the upsized senior secured revolver (unrated).

The ratings on Regency reflect a weak business risk profile and aggressive financial risk profile, S&P said.

These risks are somewhat mitigated by long-lived, predictable reserves and healthy drilling activity in Regency's operating regions, some geographic diversity and its portion of fee-based contracts, the agency said. The ratings also reflect an improved, although still aggressive, financial profile.

The ratings incorporate expected year-end 2007 credit protection metrics including total debt to EBITDA of about 3.3 times, the agency said.

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