Southern Star Credit Ratings Raised To 'BBB-', Off Watch

Jan. 6, 2006, New York (Standard & Poor's)
Standard & Poor's Ratings Services said today that it raised its corporate credit ratings on natural gas pipeline company Southern Star Central Corp. (Southern Star Corp.) and wholly owned subsidiary Southern Star Central Gas Pipeline Inc. (Southern Star Pipeline) to 'BBB-' from 'BB'.

At the same time, Standard & Poor's raised its debt ratings on Southern Star Corp.'s $180 million notes due 2010 to 'BB+' from 'B+', and affirmed its 'BBB-' ratings on Southern Star Pipeline's $175 million senior secured notes maturing November 2006 and $50 million senior secured term loan maturing May
2006.

Standard & Poor's removed all the ratings from CreditWatch with developing implications, where they were placed in connection with the company's sale to GE Energy Financial Services and Caisse de depot et placement du Quebec in August 2005.

The outlook is stable. The Owensboro, Ky.-based company has about $413 million of principal long-term debt outstanding on a consolidated basis.

"The CreditWatch resolution and consequent upgrade of Southern Star reflect its improved financial profile and continued strong business profile," said Standard & Poor's credit analyst Plana Lee.

Standard & Poor's also said that an $18 million (or 12%) rate increase in April 2005 has led to better profitability, and, in connection with the company's sale, its capital structure has improved, with consolidated adjusted total debt to capital going to 48% from 70%. The company's $50 million preferred stock, which was previously viewed as debt like, was converted into common equity. Consolidated adjusted funds from operations to total debt metrics are also consistent with expectations for the 'BBB-' rating at about 12%.

Southern Star is a regulated interstate natural gas pipeline that transports gas from Rocky Mountain and Midcontinent regions to major metropolitan areas in Kansas and Missouri.

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found
on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.

Primary Credit Analyst
Plana Lee
New York, NY
212-438-3119
plana_lee@standardandpoors.com

Publication date
06-Jan-06, 13:03:34 EST
Reprinted from RatingsDirect

Source
Standard & Poor's