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TRANSCONTINENTAL GAS PIPE LINE DEBT LOWERED TO 'BB', OFF FITCHALERT -- FITCH FINANCIAL WIRE --

 TRANSCONTINENTAL GAS PIPE LINE DEBT LOWERED TO 'BB', OFF FITCHALERT
 -- FITCH FINANCIAL WIRE --
 NEW YORK, April 23 /PRNewswire/ -- Transcontinental Gas Pipe Line Co.'s (TGPL) $545 million debentures and notes are lowered to 'BB' from 'BBB' by Fitch. Its $106 million preferred stock is lowered to 'B+' from 'BBB-'. The credit trend is uncertain. The ratings are removed from FitchAlert where they were placed with negative implications on Oct. 10, 1990. TGPL is one of two natural gas pipeline subsidiaries of Transco Energy Co.
 The reduction reflects weakened credit fundamentals at TGPL and Transco and near-term liquidity concerns. Although prospects for financial recovery through execution of Transco's publicly announced restructuring plan appear favorable, borrowing limits under Transco's bank credit facility could be tested this summer if the company is unable to raise at least $150 million of cash through permanent financing and/or asset sales. Access to capital markets may depend on whether demand for below investment grade debt will continue at the current strong levels.
 Debt financing by Transco, with the proceeds to reduce outstanding bank debt, would supply adequate working capital for the near-term cash needs of Transco and its subsidiaries. Cash requirements in 1992, in addition to generally predictable capital and operating expenditures, include substantial rate refunds and potentially large litigation charges. Debt financing should provide Transco a financial cushion to complete asset sales in a timely fashion and further reduce consolidated debt. The market for energy assets remains weak. However, management recently stated that it would sell some of its more valuable core assets if necessary.
 Most of the components to the restructuring plan announced by management last autumn, particularly reductions in controllable costs, have been realized on or close to target. However, the expected issuance of $100 million common stock has been delayed due to concerns relating to producer contract litigation between TGPL and Challenger Minerals Inc. Common stock financing remains an important part of the long-term recovery plan. The eventual completion of equity financing and asset sales will ease liquidity concerns and reduce consolidated debt.
 Long-term recovery is supported by the operating strengths and predictable cash generated by Transco's pipeline subsidiaries. However, balance sheet strengthening at Transco will be slow, in part because some assets may be sold below book value and result in common equity writedowns. The common equity component of total capitalization for Transco at year-end was only 13.4 percent. Credit fundamentals are stronger and recovery will be quicker at TGPL and the other pipeline subsidiary, Texas Gas. Debt leverage at TGPL, including a $350 million loan guarantee on Transco's bank credit facility, was 67 percent of capitalization at Dec. 31, 1991. While Fitch does not presently rate Transco's senior debt, it would be rated below TGPL given its holding company status and weaker credit quality.
 -0- 4/23/92
 /CONTACT: Ralph G. Pellecchia of Fitch, 212-908-0586/
 (E) CO: Transcontinental Gas Pipe Line Co. ST: Texas IN: OIL SU: RTG


SB -- NY103 -- 1993 04/23/92 14:34 EDT
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Publication:PR Newswire
Date:Apr 23, 1992
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