TEXT-Fitch views new Energy Transfer Partners structure favorably

June 18 - The planned formation of a new holding company that would own both Southern Union Company [SUG: Issuer Default Rating (IDR) 'BBB-' by Fitch] and Sunoco, Inc. (SUN: IDR 'BB+') has favorable credit implications for Energy Transfer Partners, L.P. (ETP: IDR 'BBB-'; Outlook Negative), according to Fitch Ratings. Concurrent with the contemplated SUN/ETP merger, Energy Transfer Equity, L.P. (ETE: IDR 'BB-') will contribute its interest in SUG into a new ETP-controlled entity (ETP HoldCo) in exchange for a 60% equity interest in ETP HoldCo. At the same time ETP will contribute its interest in SUN to ETP HoldCo and retain a 40% interest in ETP HoldCo. Prior to the contribution of SUN into ETP HoldCo, SUN's general partner and limited partner interests in Sunoco Logistics Partners L.P. (SXL: IDR 'BBB') will be transferred to ETP. The new structure simplifies ETP's organizational structure and diversifies and increases the scale of its operations. Importantly it is an efficient way to drop down SUG assets to ETP, resolving uncertainties about future SUG dropdowns and eliminating transactional and capital market risks. The transaction is expected to be completed by the fourth quarter of 2012. In addition to any operational benefits, it is Fitch's expectation that ETP HoldCo will generate tax savings and contribute to improving leverage metrics at ETP. Given the limited amount of ETP debt needed to complete the SUN merger and the expected cash flows to be generated by SXL and ETP HoldCo, ETP's consolidated company and stand-alone debt to EBITDA should approach 4.0 times (x) in 2013, down from approximately 4.6x today.

ETP's current Negative Rating Outlook reflects its aggressive acquisition and organic growth activities, the associated transactional risk, and the impact these activities have on credit metrics, which are currently weak for its rating category. However, Fitch will review ETP's rating and Negative Rating Outlook as the company executes the formation of ETP HoldCo and consider it in future rating deliberations. Fitch affirmed the ratings of ETP, SUN, and SXL on April 30, 2012, following the announced acquisition of SUN by ETP. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and(New York Ratings Team)