Standard & Poor's Ratings Service (S&P) on Tuesday affirmed El Paso Corp.'s "B-" credit rating and revised the outlook to "stable" from "negative" to reflect the company's progress to restructure and improve liquidity.
"The stable outlook reflects the expectation that El Paso will continue to address adequately the company's operational and financial issues," said credit analyst Ben Tsocanos. "Although liquidity is not an immediate concern, El Paso will struggle to produce enough cash flow to barely cover its debt service as it tackles the challenges in its plan."
El Paso has closed or announced asset sales over the last 18 months that include its oil refining business, most of its domestic power operations, ownership of GulfTerra Energy Partners LP, and several noncore exploration and production (E&P) and pipeline assets. The sales have yielded about $4 billion of proceeds, well within management's projected range, and they "are an important step toward streamlining El Paso's business and building adequate liquidity to meet looming debt maturities," S&P said.
Although most of the sales are complete, incremental sales, including power generation plants in Asia, are being considered. Once the divestitures are accomplished, El Paso will concentrate on two primary businesses, natural gas pipelines and E&P.
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