ARKLA $850 MILLION 'A-' DEBT ON FITCHALERT NEGATIVE -- FITCH FINANCIAL WIRE --
ARKLA $850 MILLION 'A-' DEBT ON FITCHALERT NEGATIVE
-- FITCH FINANCIAL WIRE --
NEW YORK, Jan. 30 /PRNewswire/ -- Arkla Inc.'s $850 million "A-" debentures and notes are placed on FitchAlert with negative implications.
The action reflects anticipated continuation of subpar performance in the transmission and exploration and production operations. These business segments are particularly sensitive to natural gas prices. As a result of poor performance in 1991, financial protection measures have deteriorated and are well below those appropriate for the "A-" rating category. Total debt at year-end 1991 reached $2.3 billion, up $160 million from the previous year, and well in excess of what had been anticipated. The debt figure includes some $650 million in short-term debt. Total debt exceeds 65 percent of capitalization. Current weak natural gas prices will limit the company's ability to measurably improve credit measures in the near term.
Weak performance in the pipeline and exploration and production operations is somewhat offset by satisfactory results in the company's sizable gas distribution operations. No meaningful improvement is anticipated in the pipeline group near term as transportation margins are not expected to improve. Arkla's ability to take advantage of the spread in wellhead prices between mid-continent and Gulf Coast gas has been curtailed as this spread has narrowed significantly and is not expected to widen to its previous relationship near term.
Fitch's review of Arkla will focus on actions by management to reduce leverage and bring financial parameters back to levels appropriate for its credit rating. While the company does not expect earnings to cover dividends in 1991 or 1992, it has indicated that it intends to fund 1992 capital expenditures internally and expects to have sufficient cash flow to cover capital expenditures and dividends.
Arkla, Inc. is a diversified natural gas company engaged in the distribution, transmission, and exploration for and production of natural gas.
/CONTACT: Heather Kenny of Fitch, 212-908-0558/
(ALG) CO: Arkla Inc. ST: Louisiana IN: OIL SU: RTG SH -- NY080 -- 5297 01/30/92 13:39 EST