S&P rates Southern Union notes BBB

Standard & Poor's said it assigned its BBB rating to Southern Union Co.'s (BBB/negative/--) $100 million senior notes due 2010 that are linked to its offering of 2 million equity units.

The outlook is negative.

Southern Union will use the proceeds to repay debt incurred to invest in half of CCE Holdings Inc., the parent company of CrossCountry Energy LLC (BBB/stable/--). Financing this $590.5 million transaction with $485 million of common equity and $100 million of mandatory convertible debt supports the company's debt-reduction goal, the agency said.

S&P said the rating on Southern Union reflects the company's highly leveraged balance sheet, the result of several recent sizeable acquisitions, and strong business profile. The regulated gas distribution and transportation businesses, which account for 98% of earnings, produce stable and predictable cash flows. The company serves growing markets in Missouri, Pennsylvania, Rhode Island, and Massachusetts, has limited commodity-price risk, and is allowed reasonable rates of return by federal and state regulators.

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