Fitch Rates NGPL PipeCo $3B Sr Notes 'BBB-'; MidCon LLC 'BBB-'; Outlook Stable.

NEW YORK -- Fitch Ratings assigns NGPL PipeCo LLC (PipeCo)'s offering of $3 billion in senior unsecured notes a 'BBB-' rating. Fitch expects to maintain the same rating upon the assumption of the obligation by MidCon LLC (MidCon). The notes initially will be issued by PipeCo and will not be guaranteed by MidCon, with the proceeds of the notes held in escrow. However, the indenture requires that PipeCo merge with and into MidCon, and the assumption by MidCon of the obligations of PipeCo under the indenture with the same effect as if MidCon was the original party to the indenture. Therefore, Fitch views the notes as MidCon notes and the ratings are reflected accordingly.

Fitch is initiating ratings on MidCon as follows, with a Stable Outlook:

--Long-term Issuer Default Rating (IDR) of 'BBB-';

--Senior unsecured rating of 'BBB-'.

The proposed senior unsecured notes are expected to comprise the following:

--$1.25 billion principal amount of senior notes due 2012;

--$1.25 billion principal amount of senior notes due 2017;

--$500 million principal amount of senior notes due 2037.

The notes are being issued in association with the sale of an 80% interest in MidCon, LLC, the holding company of the Natural Gas Pipeline Company of America (NGPL), by Knight, Inc. Knight Inc. announced on Dec. 11, 2007 that it has agreed to sell an 80% majority share of MidCon to a newly formed entity owned by a consortium consisting of two Babcock & Brown managed funds, The Public Service Pension Board, a Canadian pension fund, and PGGM, a Netherlands pension fund, collectively Myria Acquisition Inc. (Myria).

MidCon's ratings reflect the stable, consistent, and predictable cash flows generated by NGPL, MidCon's only asset. The ratings are reflective of NGPL's natural gas transport and storage assets and its superior market position serving the competitive Midwest, particularly the Chicago metro area. As one of the largest interstate pipeline systems in the U.S., NGPL boasts favorable rate structures with a high percentage of fixed-fee long-term contracts and attractive organic expansion opportunities. Substantially all of its pipeline capacity is committed under contracts ranging from one to five years and the average contract length has increased to 3.4 years. Consequently, MidCon is in a position to continue to generate consistent, sustainable cash flow. In addition, MidCon's business risk profile is enhanced by its access to diverse and resource-rich supply areas and deliverability access to high demand areas within its service territories.

The ratings also consider several offsetting factors. Based on Fitch estimates MidCon will trend toward the higher ranges of leverage that Fitch sees for investment grade pipelines. FERC regulated pipelines typically have between 40%-60% debt leverage in their capital structure. This degree of leverage is tolerated somewhat by the volume-insensitive, fixed-payment contract nature of the pipeline business that helps generate predicable cash flows, which in turn promotes relatively stable credit metrics. MidCon's leverage appears permanent and Fitch believes it will remain at the high end of this range.

In addition, Fitch's ratings recognize the future risks associated with the competitive nature of the Midwest market, in which MidCon operates. While these risks are tempered by management's continued success rolling over capacity contracts with its market-area utility customers and by the competitive advantages that MidCon's size, scale and storage provide, they no means guarantee that management will continue to be as successful in rolling over contracts. Moreover, because MidCon competes primarily on price there remains a possibility that MidCon could see margin deterioration even with successful recontracting as the U.S. pipeline infrastructure continues to evolve and new pipelines get built throughout the country thereby changing natural gas supply, demand and pricing dynamics.

Proceeds from the notes will be held in escrow and used to repay Knight at the closing. If the transaction does not close by March 31, 2008, notes will be redeemed at 100% of the aggregate principal amount of the notes plus accrued and unpaid interest. The notes will be unsecured senior obligations and will rank equally with any other unsecured senior indebtedness that MidCon may incur.

Fitch considers the Rating Outlook to be Stable. This reflects the stable, predictable cash flow generation from fixed-price contracts with an average life of 3.4 years and 4.4 years for transport and storage, respectively, and Fitch's expectations that balance sheet leverage will be relatively constant and all free cash flow (defined as CFO less maintenance capex) will be paid out as dividends/distributions to MidCon's owners.

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.