Fitch Rates Energy Transfer Equity $1B Notes 'BB'; Outlook Stable

NEW YORK, Sep 15, 2010 (BUSINESS WIRE) -- Fitch Ratings has assigned a 'BB' rating to Energy Transfer Equity, L.P.'s (ETE) offering of $1 billion senior notes due 2020. Note proceeds will be used to repay all borrowings outstanding under its existing $500 million secured revolving credit facility, repay a portion of its $1.45 billion secured term loan due November 2012 (Term Loan B) and related interest swap breakage costs, and to pay transaction fees and expenses. Fitch also assigns a 'BB' rating to ETE's $200 million five-year secured revolving credit facility maturing in September 2015 (the New Revolver) which will close contemporaneously with the retirement of the existing revolving credit facility. The Rating Outlook is Stable.

ETE owns approximately 50.2 million Energy Transfer Partners, L.P. (ETP; rated 'BBB-' with a Stable Outlook by Fitch) limited partner (LP) units, a 1.8% general partner (GP) interest in ETP, and all of the incentive distribution rights relating to ETP and approximately 26.3 million Regency Energy Partners, LP (RGNC) LP units, a 2.0% GP interest in RGNC, and all incentive distribution rights relating to RGNC. ETE's cash flow relies entirely on distributions from ETP and RGNC. Key factors driving the rating are ETP's and RGNC's credit profiles and parent-level debt leverage.

The notes initially will be secured equally and ratably with loans under the New Revolver and the Term Loan B by a first-priority interest by all tangible and intangible assets of ETE, including the LP and GP interests in ETP and RGNC that it owns. Once the Term Loan B is repaid in full, the notes will no longer be secured by the collateral and will be unsecured obligations of ETE and will rank junior to the secured New Revolver as to collateral. The notes contain restrictions on the creation of future liens to secure debt following the release of collateral, except under certain limited circumstances or unless all outstanding senior notes are equally and ratably secured with any new secured debt (known as the Negative Pledge).

ETE's ratings and Stable Rating Outlook are primarily dependent on the financial and operating characteristics of ETP, to a lesser extent RGNC, the standalone credit profile of ETE, and the favorable recovery prospects for its creditors. Fitch considers ETE's adjusted 2010 debt-to-EBITDA of 3.1 times (x), as estimated by Fitch, as strong for a master limited partnership (MLP) holding company structure and should not present an inordinate amount of risk given the quality of its cash flow stream. Pro forma for the senior note financing, leverage and interest coverage ratios should temporarily weaken due to an increase in total debt outstanding of approximately $116 million to cover swap breakage fees and other issuance costs. Over the longer term, ETP's and RGNC's upstream partner distributions should increase as several expansion projects and acquisitions generate distributable cash flow. As a result, ETE's cash flow ratios will strengthen. In addition, the debt repayment funded by the senior note issuance lowers the refinancing risk associated with the revolving credit facility and Term Loan B and lengthens ETE's debt maturity schedule