Williams, Williams Partners to deleverage under new strategy

By Devika Patel

Knoxville, Tenn., Jan. 9 – Williams Cos., Inc. and Williams Partners LP announced on Monday that the companies intend to deleverage under a new plan of financial repositioning for long-term, sustainable growth of both companies.

“I would just note that the Williams growth rate is quite a bit higher than Williams Partners in part because we would be reducing coverage,” chief financial officer Don R. Chappel said on the company’s conference call announcing the financial repositioning transaction on Monday.

“We’re maintaining very robust coverage at Williams, as we reduce some revolver debt at Williams; when we reduce that debt, then we’d be able to put that excess cash flow back into the dividend.

“Let’s focus on debt reduction,” Chappel said.

“The transaction will enable a significant reduction of debt at Williams Partners and we do have a meaningful amount of long-term debt that we can take out here in early 2017, including some callable ACMP bonds, and some debt becomes due at Williams Partners in the month of February.

“It significantly will improve Williams Partners credit profile and solidify the investment grade ratings,” Chappel said on the call.

President and chief executive officer Alan S. Armstrong added on the call that the transaction “would be in line with the continued deleveraging the business and the ability to grow the business on the back of debt, rather than equity, for the next several years.”

Under the strategy, Williams will permanently waive payment obligations under the Williams Partners incentive distribution rights it holds and convert Williams’ economic general partner interest into a non-economic interest for 289 million newly issued Williams Partners common units.

The value of the transaction is $11.4 billion.

Williams also expects to purchase newly issued common units of Williams Partners at a price of $36.08586 per unit, a purchase it will fund with equity.

Effective with the quarterly distribution for the quarter ending March 31, Williams Partners expects to pay a quarterly distribution of $0.60 ($2.40 per unit on an annualized basis), a reduction of approximately 29% from its expected fourth quarter distribution of $0.85 per common unit ($3.40 per unit on an annualized basis).

Williams Partners expects distribution growth of 5% to 7% annually over the next several years.

Williams expects to pay a quarterly dividend of $0.30 per share ($1.20 per share on an annualized basis), an increase of 50% above Williams’ dividend paid in December 2016 of $0.20 per share ($0.80 per share on an annualized basis).

Williams expects dividend per share growth of 10% to 15% annually over the next several years.

Williams also announced that in addition to the previously announced Geismar monetization process it has identified other assets that do not support its strategy. Williams expects to raise more than $2 billion after tax from selling the Geismar assets and these additional assets.

Williams, including its assets held through Williams Partners LP, is an energy infrastructure company based in Tulsa.

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