Fitch Affirms AmeriGas' Senior Notes at 'BB+'; Outlook Stable.

NEW YORK -- Fitch Ratings has affirmed AmeriGas Partners, L.P.'s (APU) senior unsecured notes and issuer default rating (IDR) at 'BB+'. The Rating Outlook is Stable. An indirect subsidiary of UGI Corp. is the general partner and 44% limited partner for APU, which, in turn, is a master limited partnership (MLP) for AmeriGas Propane, L.P. (AGP), an operating limited partnership. Approximately $933 million of debt is affected.

APU's ratings and Stable Outlook reflect the underlying strength of subsidiary AGP's retail propane distribution network, broad geographic reach, adequate credit metrics, and proven ability to manage product costs under various operating conditions. Additionally, the company's propane cylinder exchange business provides moderate positive cash flow during the summer months when AGP's traditional propane distribution business is relatively slow. APU's rating also reflects the structural subordination of its debt obligations to approximately $150 million of notes at AGP. Over the last several years, APU has refinanced a substantial amount of AGP's debt at the MLP level.

APU's financial performance will continue to be affected by weather conditions during the winter heating season, and the company must continue to manage volatile supply costs and customer conservation. The combination of warm weather and elevated commodity prices during the last two winter heating seasons has had a moderately negative impact on APU's credit metrics. Weather during December 2006, a key operating month for the company, was particularly warm and during the first fiscal quarter of 2007 weather overall was 9% warmer than normal. For the latest 12 months ended Dec. 31, 2006, consolidated EBITDA (adjusted to exclude a $17 million loss associated with the early extinguishment of debt) to interest and debt-to-EBITDA equaled 3.5 times (x) and 3.7x, respectively. However, Fitch notes that APU's recent financial performance has generally exceeded expectations for company performance under the stress case conditions of a warm weather and high commodity price heating season environment. Cash distributions to APU, defined as EBITDA generated by AGP minus AGP interest expense and maintenance capital expenditures covered interest on APU's stand-alone obligations by 3.7x during the latest 12 months. However, as a consequence of increased outstanding MLP debt, and despite higher expected levels of cash available to APU from AGP, this ratio has declined from earlier levels and distribution coverage of MLP interest is anticipated to fall to approximately 3.5x.

The persistence of high propane prices and volatility may lead to further customer conservation, increased bad debt expense, and test APU's ability to sustain gross profit margins. Wholesale propane prices, as measured by postings at Mont Belvieu, Texas, have fallen in recent weeks but remain at historically high levels and exceeded $1.00 per gallon as recently as Dec. 2006. However, APU has managed to effectively pass through propane supply costs to customers and maintain relatively consistent gross margins during periods of volatile weather conditions and commodity prices over the past several years.

APU is the nation's largest retail propane distributors with a diverse base of approximately 1.3 million customers in 46 states and current retail sales volumes in excess of 1.0 billion gallons annually. An indirect subsidiary of UGI Corp. is the general partner and 44% limited partner for APU. APU, in turn, is an MLP for AGP, an operating limited partnership. The company's cylinder exchange business accounts for approximately 10% of total EBITDA.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.