Fitch reviews Southern Natural Gas

Fitch Ratings said it placed Southern Natural Gas Co. on Rating Watch Positive following the announcement that Southern Co. (A-/stable) will purchase a 50% stake in the natural gas pipeline system from Kinder Morgan Inc. (BBB-/stable).

Fitch currently rates the company’s long-term issuer default rating and senior unsecured ratings at BBB-

In association with the transaction, Southern Natural Gas will be released from the cross guarantee that it currently provides to Kinder Morgan and its other rated subsidiaries. As a result of Southern Natural Gas’ release from the cross guarantees, Fitch expects to rate Southern Natural Gas on its standalone credit profile at or near the close of the transaction.

Given the low risk nature and stable cash flow of Southern Natural Gas’ pipeline system, Fitch said it believes the company’s credit profile is more consistent with a BBB+ long-term issuer default rating. The transaction is subject to Hart-Scott-Rodino review and is expected to close sometime before year-end 2016.

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