Thomas F. Karam, president of Southern Union, said the downgrade of the company’s corporate credit rating from BBB+ to BBB by Standard & Poor’s was expected, and the action was accompanied by some other positive findings. For example, S&P removed Southern Union’s rating outlook from “CreditWatch” and assigned the company a stable rating.

S&P also recognized that its recent acquisition of CMS Panhandle will be accretive to earnings and cash flow. “Improved earnings and cash flow from the acquisition will further strengthen our balance sheet and solidify Southern Union’s investment grade ratings,” Karam predicted.

S&P’s BBB corporate credit rating was assigned to the senior unsecured debt of Southern Union and will be assigned to the senior unsecured debt of CMS Panhandle, which currently is rated at BB.

In December, Southern Union and AIG Highstar Capital LP, announced a definitive agreement with CMS Energy to acquire Panhandle for $1.8 billion, which includes $1.166 billion in gross debt (see Daily GPI, Dec. 24). The transaction is expected to close by March 31, following clearance by the Federal Trade Commission. Southern Union serves one million customers through its natural gas utilities in Missouri, Pennsylvania and Rhode Island. The Company also owns electric generating facilities in Pennsylvania.

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