S&P may upgrade Terasen

Standard & Poor's said it placed its BB- corporate credit and senior unsecured debt ratings and B- subordinated debt rating on Terasen Inc., as well as its BBB corporate credit and senior unsecured debt ratings and A- senior secured debt rating on Terasen Gas Inc. on CreditWatch with positive implications following the announcement that Kinder Morgan Inc. (BB- with stable outlook) will sell Terasen Inc. to Fortis Inc.

As part of the acquisition, Fortis will assume C$2.3 billion in debt. About C$1.8 billion of this will be held at Terasen's wholly owned subsidiary, Terasen Gas, with the balance held at Terasen. The debt held at Terasen will be structurally subordinate to that held at Terasen Gas, the agency said.

S&P said it does not believe there will be any change in the capital structure of Terasen Gas as a result of this acquisition. The acquisition is subject to regulatory approval and should close in mid-2007, the agency said.

The ratings on Terasen were previously equalized with the ratings on Kinder Morgan, reflecting Kinder Morgan's 100% control and ownership of the subsidiary. Should the acquisition be completed, S&P said it expects the rating will be closely aligned with the rating on Fortis. The resolution of the CreditWatch will be dependent on the rating outcome for Fortis, S&P said.

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