AmeriGas $40MM Senior Notes Rated 'BB+' By Fitch Ratings

Business Wire, May 6, 2002

Business Editors

NEW YORK--(BUSINESS WIRE)--May 6, 2002

AmeriGas Partners, L.P.'s (AmeriGas) $40 million senior notes due 2011, issued jointly and severally with its special purpose financing subsidiary AP Eagle Finance Corp., are rated 'BB ' by Fitch Ratings. In addition, AmeriGas' outstanding $345 million senior notes are affirmed at 'BB '. The Rating Outlook is Stable. An indirect subsidiary of UGI Corp. is the general partner and a 51% limited partner for AmeriGas. AmeriGas in turn is a master limited partnership (MLP) for AmeriGas Propane, L.P., an operating limited partnership (OLP). Proceeds from the new senior notes will be utilized to make a capital contribution to the OLP, which in turn will use the funds primarily to reduce bank borrowings.

AmeriGas' rating reflects the subordination of its debt obligations to approximately $608 million secured debt of the OLP including the OLP's privately placed 'BBB'-rated first mortgage notes. In addition, Fitch's assessment incorporates the underlying strength of AmeriGas' retail propane distribution network. AmeriGas is viewed as one of the premier retail propane distributors evidenced by its efficient operations, favorable acquisition track record, and proven ability to sustain gross profit margins under various operating conditions. As a result of the 2001 acquisition of Columbia Propane, AmeriGas now ranks as the nation's largest retail propane distributor with retail sales volumes of approximately 1 billion gallons annually and a geographically diverse base of more than 1.3 million customers in 46 states. Primary industry concerns are the negative impact of warm heating-season weather on profits and volumes sold and the potential adverse impact of supply price volatility where rapid increases in the wholesale price of propane may not be immediately passed through to customers.

Fitch's credit analysis for propane MLPs emphasizes cash flow analysis on both a historic and prospective basis. Although the recent financial performance of AmeriGas has suffered due to significantly warmer than normal weather during the 2001-2002 heating season, credit measures have remained within expectations for the 'BB ' rating category. Consolidated company ratios for earnings before interest, taxes, depreciation, and amortization (EBITDA) coverage of interest and total debt to EBITDA for the 12-month period ended Dec. 31, 2002 were 2.3 times (x) and 5.1x, respectively. This compares with EBITDA to interest of 2.6x and total debt to EBITDA of 4.8x for the fiscal year ended Sept. 30, 2001. In addition, cash distributions to AmeriGas, which can be generally defined as EBITDA generated by the OLP minus OLP interest expense and maintenance capital expenditures, covered interest expense on AmeriGas' outstanding senior notes by approximately 4.4x during the 12 month period ended Dec. 31, 2002.

Fitch believes that conditions and/or events that would disrupt debt service at AmeriGas remain highly unlikely. Specifically, Fitch estimates that EBITDA at the OLP would have to drop by an additional 35% under an already severe warm weather stress case scenario in 2002 before the OLP could potentially be restricted from distributing cash to AmeriGas. The likelihood of this level of EBITDA erosion is remote given AmeriGas' strong track record of customer retention and demonstrated ability to maintain unit margins even during periods of extreme product price volatility.