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ARKLA $850 MILLION SENIOR DEBT LOWERED TO 'BBB-' OFF FITCHALERT -- FITCH FINANCIAL WIRE

 ARKLA $850 MILLION SENIOR DEBT LOWERED TO 'BBB-'
 OFF FITCHALERT -- FITCH FINANCIAL WIRE
 NEW YORK, March 10 /PRNewswire/ -- Arkla Inc.'s $850 million debentures and notes are lowered to 'BBB-' from 'A-' by Fitch. The credit trend is uncertain. The rating is removed from FitchAlert, where it was placed with negative implications on Jan. 30.
 The downgrade reflects Fitch's expectation that credit protection measures will not return to levels supportive of the former rating over the foreseeable future, as well as uncertainty concerning management's ability to improve weak performance in the company's natural gas transmission business. At Dec. 31, 1991, total debt of $2.3 billion exceeded 67 percent of capitalization, up from 62.7 percent at year-end 1990. Short-term debt of some $650 million, moreover, accounted for a comparatively high 19 percent of capitalization. Looking forward, Arkla's financial flexibility is not expected to show early meaningful improvement given its weak operating and financial profile. The high level of short-term debt and significant refinancing requirements make Arkla particularly vulnerable to dislocations in the capital markets.
 Management intends to improve cash flow and reduce debt through asset sales, lower capital expenditures, and a reduction in controllable expenses. In addition, the pipeline operations are attempting to reduce earnings sensitivity to uncontrollable factors such as weather, gas prices, and the narrowed price differential between mid-continent and Gulf Coast gas. If successful, the plan will result in improved earnings and fixed charge coverage and a gradual reduction in debt leverage. The success of these actions is not assured, however, and progress is not expected to be rapid.
 Weak performance in the pipeline and exploration and production operations has been somewhat offset by satisfactory results in the company's sizable gas distribution business. Although this segment should continue to provide an acceptable earnings and financial base, additional steps such as further asset sales or a reduction in dividends may be required before overall financial goals can be achieved.
 Arkla, Inc. is a diversified natural gas company engaged in the distribution, transmission, and exploration for and production of natural gas.
 -0- 3/10/92
 /CONTACT: Ralph Pellecchia of Fitch, 212-908-0586/
 (ALG) CO: Arkla Inc. ST: Louisiana IN: UTI SU: RTG


TQ -- NY042 -- 6864 03/10/92 11:53 EST
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Date:Mar 10, 1992
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