OREANDA-NEWS. Fitch rates Energy Transfer Equity, L.P.'s (ETE) \$500 million secured term loan offering due Dec. 2, 2019 'BB+'. The loan will have similar terms and be pari passu with ETE's secured revolver and existing \$1.4 billion term loan. ETE's Issuer Default Rating (IDR) is 'BB' and the Rating Outlook is Stable. ETE will use the term loan proceeds to repay borrowings under its revolving credit facility, to help fund the Bakken pipeline project transaction, and for general partnership purposes.

ETE currently owns the general partner (GP) and incentive distribution rights and approximately 30.8 million Energy Transfer Partners, L.P. (ETP; IDR 'BBB-' with a Stable Outlook) limited partner (LP) units, and 50.2 million ETP Class H units, which track 50% of the underlying economics of the GP and incentive distributions of Sunoco Logistics Partners L.P. (SXL; IDR 'BBB' with a Stable Outlook). ETE also owns the GP interest, incentive distribution rights and 57.2 million Regency Energy Partners LP (RGP; IDR 'BB', Rating Watch Positive) limited partnership units.

In December 2014, ETE and ETP announced the final terms of a transaction whereby ETE will transfer 30.8 million ETP Common Units, ETE's 45% interest in the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline (Bakken pipeline project), and \$879 million in cash (less amounts funded prior to closing by ETE for capital expenditures for the Bakken pipeline project) in exchange for 30.8 million newly issued Class H Units of ETP that, when combined with the 50.2 million previously issued Class H Units, generally entitle ETE to receive 90.05% of the cash distributions and other economic attributes of the general partner interest and IDRs of SXL. In addition, ETE and ETP agreed to reduce the incentive distribution rights subsidies that ETE previously agreed to provide to ETP, in 2015 and 2016. The transaction is expected to close in March 2015.

In January 2015, ETP and RGP announced their entry into a definitive merger agreement pursuant to which ETP will acquire RGP. The transaction is expected to close in the second quarter of 2015.

KEY RATING DRIVERS

Increased Scale and Diversity: Recent and ongoing mergers and growth projects at and among ETE's subsidiaries have resulted in a larger, more diversified, and generally stronger family of Energy Transfer companies. On a consolidated basis, the percentage of contractually supported fee-based margins has gradually increased. The recently announced merger between ETP and RGP should provide ETE with increased cash flows driven by expected synergies and improved returns on growth projects previously planned at RGP. Additionally, ETE should benefit somewhat from a simplification of its organizational structure and slightly improved credit profile of its subsidiaries though it remains structurally subordinate to a significant amount of subsidiary debt. With the Bakken pipeline project transaction, ETE will benefit from its increased interest in SXL's incentive distributions given SXL's strong growth prospects.

Leverage Metrics: ETE's adjusted debt-EBITDA, which measures ETE parent company debt against distributions it receives from its affiliates, approximated 4.3x at the end of 2014. Standalone leverage at ETE is expected to be maintained in the 3.0x to 4.0x range on a sustained basis. A material weakening in leverage metrics beyond 4.5x could result in a negative rating action. ETE's board recently authorized the repurchase by ETE of up to \$2 billion of its common units at its discretion. Fitch expects ETE to use revolver drawdowns and issue new debt to fund any repurchases.

Liquidity is Adequate: ETE has access to a \$1.5 billion secured five-year revolving credit facility that matures in October 2018. ETE's operating affiliates have significant operating flexibility with adequate liquidity and the ability to fund their planned growth with capital market transactions. Potential uses of the revolver include: funding stock buybacks, future acquisitions, and to initiate organic growth projects not financed at the MLPs. ETE has no debt maturing until 2018. Approximately \$940 million was drawn under the revolver as of year-end 2014. The revolver capacity was increased to \$1.5 billion (from \$1.2 billion) in February 2015.

The ETE revolver and term loans have two financial covenants: a maximum leverage ratio of 6.0 to 1.0; 7.0 to 1.0 during a specified acquisition period and fixed charge coverage ratio of 1.5 to 1.0. ETE notes, term loan and credit facility are secured by a first priority interest in all tangible and intangible assets of ETE, including its ownership interests in ETP, RGP, and TLNG.

RATING SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to a positive rating action include:

--ETE parent company debt to EBITDA maintained below 1.5x;
--Improving credit profiles at ETP.

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

--Increasing ETE parent company leverage above 4.5x;
--Weakening credit profiles at ETP.