Moody’s Investors Service Wednesday confirmed the ratings of The Williams Companies, Inc. at Baa2 senior unsecured and its subsidiaries but changed the outlook to negative from stable. The ratings agency cited the potential bankruptcy and contingent liabilities of the company’s former subsidiary, Williams Communications Group (WCG), but noted Williams is negotiating to take over payments for WCG debt and “eliminate certain trigger events.”
Williams has said it could be obligated to cover WCG’s $2.2 billion in debt if the communications company defaults on its loans (see Daily GPI, Feb. 26).
Moody’s noted “near-term pressure” on earnings and cash flow. However, Williams “has a substantial and diverse asset base that provides strong support for its credit. Its businesses are well integrated down the natural gas value chain.” Williams’ pipelines, “which account for about a quarter of its operating income, provide a stable base for further expansion of its pipelines as well as for investments in Williams’ unregulated businesses.” Moody’s said Williams is examining alternative actions should WCG file for bankruptcy, including “working with the WCG Share Trust noteholders by pursuing a consent solicitation to confirm Williams’ obligation to pay interest and principal under the current schedule and to eliminate certain trigger events. If approved, this would be a favorable development,” Moody’s said.
“Our current expectation is that Williams’ initiatives to reduce debt and to improve liquidity will be substantially completed in the near-term, and that they should help stabilize Williams’ debt protection measurements at levels commensurate with an investment grade rating,” Moody’s said.
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