OREANDA-NEWS. S&P Global Ratings today affirmed its 'BBB-' corporate credit rating on Houston-based Boardwalk Pipeline Partners L. P. and its operating subsidiaries Gulf South Pipeline Co. L. P. and Texas Gas Transmission LLC. The outlooks remain stable. We are also raising the ratings on Boardwalk's unsecured debt to 'BBB-' from 'BB+'(equalized to the corporate credit rating), including its revolving credit facility.

"The rating action to revise Boardwalk's unsecured debt to 'BBB-' (equalized to the corporate credit rating) from 'BB+' reflects our view that Boardwalk now has less priority debt at its operating companies, as Boardwalk has refinanced debt at its operating companies with debt at Boardwalk," S&P Global Ratings analyst Stephen Scovotti said.

Our assessment of Boardwalk's stand-alone credit profile (SACP) of 'bb+' reflects a satisfactory business risk profile and aggressive financial risk profile. The satisfactory business risk profile reflects the large percentage of fixed-fee revenues, primarily investment-grade customer base, and improving contract length as new projects with long-term contracts come online. However, changing market dynamics resulting from an oversupply of shale gas and weaker basis differentials could pressure rates for contract renewals. The weighted average contract life of existing firm transportation agreements is about five years, but new projects have contracts that approach 20 years. We view Boardwalk's size and scale, as well as current growth projects, as positive in comparison to its 'BB'-rated peers.

The stable outlook reflects our expectation that Boardwalk's consolidated adjusted debt to EBITDA will be 4.5x to 4.75x over the next year. We expect Boardwalk to generate negative free cash flow in 2016 and 2017, as its capital spending program will be elevated as the company continues to focus on growth projects backed by long-term contracts.

We could lower the ratings if cash flow from Boardwalk's core transportation and storage business worsens, such that the partnership sustains total debt to EBITDA above 5.5x in the long term. This could also occur if the partnership's projects have delays or cost overruns or there is further pressure on contract renewal rates.

We could raise the ratings on Boardwalk if the company is able to maintain on a sustained basis debt to EBITDA below 4.5x. This could occur if the company completes its current growth projects on time and without significant cost over runs and the company funds future growth projects in a balanced manner.