Moody's may downgrade SourceGas notes to junk

Moody's Investors Service said it placed SourceGas LLC's Baa3 $325 million 5.9% senior unsecured notes due 2017 under review for possible downgrade.

The review is based on the expectation of higher debt levels and potential future acquisitions as presented in the company's business plan, the agency said. In November, SourceGas announced its intention to acquire Arkansas Western Gas Co. from Southwestern Energy. This follows last year's purchase of the Kinder Morgan's natural gas retail distribution and related operations for $710 million plus working capital.

In its review, Moody's will consider the size and timing of possible acquisitions to be undertaken, their overall funding and impact on the company's capitalization, corporate liquidity and the ability for the company to generate cash from operations for internal operating and capital expenditure needs.

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