Williams Partners’ Leverage Is under Control: Here’s Why
Williams Partners’ outstanding debt
Williams Partners’ (WPZ) total outstanding debt has fallen from its peak in 2015 of $19.7 billion to $18.6 billion as of June 30, 2017, a fall of 5.6%. That was driven by its recent measures to strengthen its balance sheet. That includes asset sales, financial repositioning, and timely completion of its organic projects. Williams Partners successfully completed the Canadian business sale and the Geismar plant sale in the first half of 2017. As part of financial repositioning, WPZ announced distribution cuts, the removal of IDRs (incentive distribution rights), and the conversion of economic GP (general partner) interests to non-economic GP interests, which resulted in significant cash savings.
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Moody’s recently changed the outlook of Williams Partners and its C corporation GP, Williams Companies (WMB), to positive from stable. According to Pete Speer, Moody’s senior vice president, “If the partnership can continue its strong execution on growth projects while maintaining its lower financial leverage and good distribution coverage, the ratings could be upgraded in 2018.”
Williams Partners’ leverage
Williams Partners’ leverage situation has improved in recent quarters, driven by balance sheet strengthening measures. Its net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) multiple was 4.1x as of June 30, 2017. It’s targeting a rating agency adjusted net debt-to-EBITDA multiple of less than 4.5x by the end of 2017.
In the next part, let’s look at Williams Partners’ distribution guidance and yield.