AmeriGas Partners $100M Sr Notes Affd `BB+' by Fitch IBCA.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 17, 2000

AmeriGas Partners, L.P.'s (AmeriGas) outstanding $100 million 10.125% senior notes, due 2007, issued jointly and severally with its special purpose financing subsidiary AmeriGas Finance Corp., are affirmed at `BB+' by Fitch IBCA. An indirect subsidiary of UGI Corp. is the general partner and a 38.6% limited partner of AmeriGas. AmeriGas in turn is a master limited partnership (MLP) for AmeriGas Propane, L.P., an operating limited partnership (OLP).

AmeriGas' `BB+' rating reflects the subordinated position of the notes to approximately $690 million secured long-term debt of the OLP, including $611 million of privately placed `BBB' rated first mortgage notes. A positive consideration is the size, scope, and track record of AmeriGas' retail propane distribution operations. AmeriGas is viewed as one of the premier operators in the retail propane distribution industry evidenced by its efficient operations, a history of sound financial performance, and an ability to sustain gross profit margins under various market conditions. Management has been proactive in developing higher margin, non-weather sensitive revenue opportunities. Moreover, AmeriGas' risk management practices and pricing strategies have enabled the company to mitigate one of the primary external risk variables faced by propane retailers product cost volatility.

Although recent financial performance at AmeriGas remains depressed due to warmer than normal weather, its credit profile has remained consistent with the `BB+' rating category. Consolidated company ratios for EBITDA coverage of interest expense and long-term debt to EBITDA for the 12-month period ended Dec. 31, 1999 were 2.4 times (x) and 4.9x, respectively. More importantly, cash distributions to AmeriGas, which can be generally defined as EBITDA generated at the OLP level minus OLP interest expense and maintenance capital expenditures, have consistently exceeded interest expense on the notes by a comfortable margin. For the 12-month period ended Dec. 31, 1999, this ratio approximated 9.2x.

Fitch IBCA's stress test analysis demonstrates that conditions and/or events that would result in an impairment of debt service at AmeriGas are highly unlikely. Because the OLP's debt agreements prohibit the OLP from making cash distributions to AmeriGas if an event of default exists, a disruption of interest payments on the MLP Notes could result from the OLP's inability to meet a 2.25x EBITDA/Interest maintenance test required under its bank credit agreement. Based on 12 month 12/31/99 results a period already significantly impacted by stress case-like operating conditions - Fitch IBCA estimates that EBITDA would have to drop an additional 19% from $161 million to $130 million in order to trigger the 2.25x test. The likelihood of this level of EBITDA erosion is remote for several reasons. First, this scenario implies a drop in retail sales volume to approximately 640 million gallons. AmeriGas' annual sales volumes have recently approached 800 million gallons despite warmer than normal weather. Furthermore, a drop in gallons driven by unprecedented customer losses is highly unlikely given AmeriGas' strong track record of customer retention. Another factor, which could lead to EBITDA erosion, would be a drop in gross profit margins per gallons sold. However, an analysis of long-term industry wide trends shows that unit margins tend to remain stable or increase during periods of weather driven volume declines.