By OGJ editors
HOUSTON, Apr. 15 -- Williams Cos. Inc., Tulsa, has signed a definitive agreement to sell its 5,800 mile Texas Gas Transmission Corp. (TGT) natural gas system to Loews Pipeline Holding Corp., a unit of Loews Corp., for $1.045 billion. The sale price includes $795 million in cash to be paid to Williams, and $250 million in debt that will remain with TGT.
Loews is a holding company that's subsidiaries include CNA Financial Corp., Lorillard Inc., Diamond Offshore Drilling Inc., and Bulova Corp.
TGTwhich transports gas from the Gulf Coast, east Texas, and north Louisiana to the southern US and US Midwesthas a design capacity of 2.8 bcfd of gas.
Pending the sale of TGT, which is subject to approval by the US Federal Trade Commission, Williams expects to record a pretax impairment charge to earnings of about $110-120 million in the first quarter, it said. The sale, which was announced Monday, is expected to close within 2 months.
"This agreement is another good example of Williams's ability to successfully execute our financial-strengthening strategy," said Steve Malcolm, chairman, president, and CEO. "We targeted (TGT) for sale less than 60 days ago. Today, we have a solid buyer and a signed agreement that captures a good price for this good pipeline run by good people."
So far this year, Williams has sold or agreed to sell $2.1 billion worth of assets. "That figure includes proceeds from assets identified as part of the company's liquidity-management plan as well as two transactions in the company's energy marketing and trading portfolio," the company said.
Williams said that under the terms of the agreement, all present TGT employees will remain with the company, adding that an "unspecified number of other Williams employees who provide services to Texas Gas will be offered the opportunity to transition to employment with Texas Gas."
Following the completion of the TGT sale, subsidiaries of Williams will still wholly own and operate about 14,000 miles of interstate gas transmission pipeline, including the Transcontinental Gas Pipe Line Corp. and Northwest Pipeline systems. The company also still holds a 50% interest in the 581 mile Gulfstream pipeline. Williams transports about 12% of the gas consumed in the US, the company said.
Following announcement of the sale Monday, Moody's Investors Service issued a research note that placed under review for possible upgrade TGT's B3 senior unsecured debt and (P)B3 shelf ratings.
Previously, Moody's had assigned a negative outlook to TGT's ratings, "reflecting the weak financial condition of Williams, and this review reflects the potential for ownership by a financially stronger company," the agency said.
"The review will focus on the probability of the transaction being consummated, the relative placement of TGT's securities in Loews's corporate structure, and changes in TGT's financial profile that may result from this transaction, and its new ownership," Moody's said.