S&P may cut Regency Gas

Standard & Poor's said it placed its B+ corporate credit rating and B+ senior secured debt rating on Regency Gas Services LLC on CreditWatch with negative implications following the company's announcement that it will incur $125 million in capital expenditures to expand and extend its existing intrastate gas pipeline in Northern Louisiana.

The expansion is expected to be complete before 2005 year-end and will be financed largely though debt.

S&P said the current ratings do not incorporate the substantial increase in debt that will be incurred as a result of this expansion. The expansion's immediate impact will significantly increase the company's leverage and pressure credit metrics at the current rating level. In addition, while the planned expansion could eventually lead to an improved business mix due to an increased proportion of fee-based (versus commodity price sensitive) cash flows, the realization of such cash flows remains uncertain at present.

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