New York, Feb. 27, 2002 — Moody’s Investors Service confirmed the ratings of The Williams Companies, Inc. (WMB, Baa2 senior unsecured) and its subsidiaries and changed the outlook to negative from stable.
The change in outlook reflects near-term pressure on WMB’s earnings and cash flow stemming from unsettled market conditions and the potential bankruptcy filing of its former subsidiary, Williams Communications Group (WCG).
WMB’s contingent obligations on certain WCG securities and synthetic leases have been factored into Moody’s analysis. WMB is examining alternative actions should WCG file for bankruptcy, each of which has varying impact on WMB’s near term cash flow.
WMB is working with the WCG Share Trust noteholders by pursuing a consent solicitation to confirm WMB’s 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 notes that WMB has sufficient bank line availability to meet maturing obligations — including commercial paper — and to support the working capital needs of its trading and marketing operation.
Moody’s said its current expectation is that WMB’s initiatives to reduce debt and to improve liquidity will be substantially completed in the near-term, and that they should help stabilize WMB’s debt protection measurements at levels commensurate with an investment grade rating.
Despite its near-term challenges, WMB 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. WMB’s regulated 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 WMB’s unregulated businesses.
Moody’s will continue to monitor the execution of WMB’s plans to reduce debt and to remove certain rating triggers in some of its structured financings, including the WCG Note Trust. The company is actively engaged in discussions to eliminate the triggers. We will also track the level and quality of cash flows that WMB generates and the degree to which they cover its cash obligations.
The following securities have been confirmed with a negative outlook: Williams Companies, Inc. – P-2 commercial paper, Baa2 senior unsecured, Baa2 senior unsecured medium-term notes, Baa2 senior unsecured bank facility, (P)Baa2 senior unsecured shelf, (P)Baa3 subordinate shelf, (P)Ba1 preferred shelf; Williams Capital I – Baa3 preferred stock, (P)Baa3 preferred shelf; Williams Capital II – (P)Baa3 preferred shelf; Williams Holding Company of Delaware, Inc. – Baa2 senior unsecured; MAPCO Inc. – Baa2 senior unsecured, Baa2 senior unsecured medium-term notes; Northwest Pipeline Corporation – Baa1 senior unsecured, (P)Baa1 senior unsecured shelf; Texas Gas Transmission Corporation – Baa1 senior unsecured, (P)Baa1 senior unsecured shelf; Transco Energy Company – Baa2 senior unsecured; Transcontinental Gas Pipe Line Corporation – Baa1 senior unsecured, (P)Baa1 senior unsecured shelf; Williams Communications Group Note Trust – Baa3 senior secured.
Headquartered in Tulsa, Oklahoma, the Williams Companies, Inc. is a diversified energy services company.