TEXT-Fitch affirms NiSource issuer default rating at 'BBB-'

Tue Dec 11, 2012 3:57pm EST

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Dec 11 - Fitch Ratings has affirmed the outstanding ratings for NiSource
Inc. (NI) and its subsidiaries as fully listed at the end of this
release. The affirmations include NiSource Finance Corp. (NiSource Finance) and
NiSource Capital Markets Inc., NI's two financing subsidiaries and Northern
Indiana Public Service Co. (NIPSCO), an electric and gas utility. The Rating
Outlooks are maintained at Stable. Approximately $7.2 billion of long-term debt
is affected by the rating actions. 

KEY RATING DRIVERS: NI's rating and Stable Outlook reflect the low business risk
and consistent operating performance generated by its geographically diverse mix
of regulated operations. Other considerations include the long-term financial 
impact of aggressive pipeline and gas utility system modernization programs and 
electric environmental capital expenditures, with a substantial portion of 
recoveries expected to be received through tracking mechanisms and relatively 
weak credit metrics at NI.

FORWARD EXPECTATIONS: NI's financial profile is expected to remain consistent 
with its current rating though its current multi-year infrastructure-build 
cycle. Fitch projects NI's 2012 debt to EBITDA to be approximately 5.0x. 
Typically NI's leverage peaks at the end of the year as a result of seasonal gas
storage purchases at its gas utilities and drops during the following months as 
gas costs are recovered. Leverage ratios modestly strengthened during 2012 
primarily benefiting from new electric rates effective Dec. 27, 2011, $339 
million forward equity sale in September 2012, and the timely financial recovery
under tracking mechanisms of a significant portion of NI's capital expenditures.

LIQUIDITY: NI's liquidity is expected to be adequate. NiSource Finance has a 
$1.5 billion revolving credit facility that matures in May 2017. The company 
also issues 'F3' rated commercial paper under a $500 CP program that is 
backstopped by the revolver. The revolver has one financial covenant which sets 
a maximum consolidated debt-to-cap ratio of 70%. The revolver also includes 
limitations on liens and restrictions on asset sales. At the end of the third 
quarter of 2012 NI had approximately $1.439 billion in net available liquidity. 
NI also has a total of $515 million of accounts receivable securitization 
facilities as follows: $240 million at Columbia Gas of Ohio; $200 at NIPSCO; and
$75 million at Columbia Gas of Pennsylvania. Upcoming debt maturities at 
NiSource Finance include $420 million of notes due 2013 and at NIPSCO $68 
million due 2013.

 

RATING TRIGGERS

Positive: Future developments that may, individually or collectively, lead to a 
positive rating action include: reduced regulatory risk with expanded revenue 
tracking mechanisms and improving credit metrics through some combination of 
earnings growth and/or debt reduction.

Negative: Future developments that may, individually or collectively, lead to a 
negative rating action include: unfavorable regulatory decisions and higher than
anticipated leverage which could result should NI not issue adequate equity to 
help fund its significant capital program. Debt to EBITDA above 5.5x on a 
sustained basis would be a catalyst for a negative rating action.

The following ratings have been affirmed with a Stable Outlook:

NiSource Inc.

--Issuer Default Rating (IDR) at 'BBB-'.

NiSource Finance Corp.

--IDR at 'BBB-';

--Senior unsecured 'BBB-'

--Short term IDR 'F3';

--Commercial paper 'F3.

NiSource Capital Markets

--IDR 'BBB-';

--Senior unsecured 'BBB-'.

Northern Indiana Public Service Co.

--IDR 'BBB-';

--Senior unsecured and revenue bonds 'BBB'.

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
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