Moody's drops SourceGas to junk

Moody's Investors Service said it downgraded the debt of SourceGas LLC to Ba1 (LGD2, 25%) from Baa3, and assigned a corporate family rating of Ba2 and a probability-of-default rating of Ba3.

The outlook is stable. The action concludes the review for downgrade that began on May 30.

The review follows the company's announcement that it will acquire Arkansas Western Gas Co. and will consider other opportunistic acquisitions as well, according to Moody's.

The issuer's Ba2 corporate family rating reflects the company's weak first 12 months of operations but also improved pro forma metrics for the first full year, the agency said.

The downgrade reflects expectation of a weakening financial profile for the entire SourceGas corporate structure, compared with one focused strictly on organic growth, Moody's noted.

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