Moody's may upgrade El Paso

Moody's Investors Service said it placed under review for possible upgrade El Paso Corp.'s B2 corporate family rating, Ba3 senior secured bank credit facility, B2 senior unsecured regular and convertible bond ratings and Caa1 subordinated convertible bond rating and the ratings of its subsidiaries, including El Paso Natural Gas Co., Southern Natural Gas Co., Tennessee Gas Pipeline Co., Colorado Interstate Gas Co. and El Paso Exploration & Production Co.

The reviews follow some favorable recent developments, including El Paso's $4 billion sale (including debt assumption) of ANR Pipeline Co. and the initiation of a debt tender offer for up to $3.3 billion (including premiums and fees) of parent-level debt with those proceeds, providing some clarity as to its near-term financial plan.

"El Paso returned to profitability over the course of 2006 and appears better able to sustain it, with less debt and the restructuring of the company essentially complete," Moody's vice president Mihoko Manabe said in an agency rating.

Over the next several weeks, the agency said it will assess El Paso's long-range financial plan and the credit implications of its improving financial flexibility on its growth strategy. Moody's will also consider potential shifts in El Paso's asset mix and business risk profile, as seen recently with the sale of ANR, its stated intention to increase its investment in exploration and production and to form a master limited partnership with some of its pipeline assets later this year.

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