Moody's upgrades Targa

Moody's Investors Service said it upgraded Targa Resources Partners LP's corporate family rating to Ba1 from Ba2, probability of default rating to Ba1-PD from Ba2-PD and senior notes to Ba2 from Ba3 and affirmed the speculative grade liquidity rating at SGL-3. The outlook was changed to positive from stable.

The agency said the upgrade reflects the company's strong execution on its growth capital spending, rising cash flows and declining financial leverage. The partnership has diversified its business mix and reduced its concentration in natural gas gathering and processing.

The Ba1 corporate family rating is supported by Targa’s scale and baseline EBITDA generation, strong execution of growth projects, higher proportion of fee-based margin contribution and strengthening credit metrics, the agency said.

In Moody’s view, these positive attributes are tempered by still material exposure to the gathering and processing business, continued weakness in natural gas liquids markets, its historically aggressive distribution policies and commodity price and volume risks.

The positive outlook reflects Moody's expectation that Targa will continue to grow its scale and partnership cash flows by using a prudent mix of equity and debt funding for its projects and maintain credit metrics in line with its investment-grade peers while further increasing fee-based business.

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