Enterprise Products Affirmed at 'BBB-' by Fitch; Outlook Remains Stable

Business Wire, July 20, 2005

NEW YORK -- Enterprise Products Operating, L.P.'s (EPOLP) outstanding senior unsecured notes are affirmed at 'BBB-' by Fitch Ratings. The Rating Outlook is Stable. Approximately $4 billion of outstanding securities are affected. EPOLP is the operating limited partnership of Enterprise Products Partners, L.P. (EPD), a leading publicly traded master limited partnership (MLP) engaged primarily in natural gas liquids (NGLs) and natural gas midstream services.

The rating affirmation follows Fitch's review of EPCO, Inc.'s pending debt recapitalization as well as recent partnership operating and financial results. EPCO, the indirect owner of EPD's general partner, is in the process of refinancing approximately $2.3 of outstanding debt obligations, including approximately $1.2 billion of borrowings incurred in February 2005 to acquire the general partner of TEPPCO Partners, L.P. (TPP) from Duke Energy Field Services, LLC. It is anticipated that $1.8 billion of existing EPCO debt will be refinanced at newly formed EPCO Holdings, Inc. (Holdings) with the remaining $525 million migrating to Enterprise GP Holdings, L.P. (EPE), a new entity established to hold 100% of the member interests in EPD's general partner. Both the Holdings and EPE credit facilities are non-recourse to EPD/EPOLP. Separately, EPE has filed with the SEC for an initial public offering of up to 14.9 million limited partnership units, proceeds of which are expected to reduce the EPE credit facility to approximately $150 million.

Given that Holdings debt obligations will rely significantly on cash distributions from EPD as a primary source of repayment, the proposed Holdings credit facility has indirect credit and financial implications for EPOLP. However, based on several considerations, Fitch has concluded that EPOLP's current rating and Outlook is not affected by the proposed Holdings debt structure. First, it is unlikely that EPD/EPOLP would be substantively consolidated in a bankruptcy of Holdings.

External counsel for EPD is expected to render an updated non-consolidation opinion in this regard. Second, Fitch considers the proposed level of debt at Holdings to be appropriately sized relative to the expected level of cash flows to be upstreamed from both EPD and TPP. Based on current annual distribution run rates, debt to available cash at Holdings is anticipated to be in the low 5.0 times (x) range which is on the low-end of similar MLP holding company loans completed over the past several months. Finally, since Holdings will rely on TPP for approximately 25% of its cash distributions, the pressure to upstream cash distributions for debt service at Holdings does not rest solely with EPD.

Regarding EPE, Fitch believes that the pending $525 million debt migration from EPCO has moderate credit implications for EPOLP in the near-term. In particular, given closer structural and functional ties, EPOLP/EPD is not expected to be 'ring-fenced' from EPE. Fitch recognizes that EPE's pending IPO will significantly lower the amount of leverage at EPE thus reducing the indirect financial burden of the EPE credit facility on EPOLP. A canceled or failed IPO of EPE would be considered a negative credit event and would likely result in a change in EPOLP's rating and/or Outlook.

Fitch's primary credit concern related to the EPE/Holdings debt is the potential adoption of more aggressive business practices at EPD by EPCO. Specifically, EPCO could aggressively pursue acquisitions and/or internal growth projects at the EPD level in order to grow the partnership's cash flow and achieve higher general partner distributions. The risk is that EPD will overpay and/or fund its growth with a higher percentage of debt going forward. Since completing its merger with Gulf Terra Energy Partners, L.P. (GTM) in September 2004, EPD has unveiled approximately $1 billion of new expenditures related primarily to internal growth projects. Fitch expects EPD to continue to maintain financial strategies consistent with its past practices, including a continued focus on funding both internal and external growth initiatives under a targeted 50/50 debt/equity mix.

On a standalone basis, EPOLP continues to exhibit operating and financial characteristics consistent with its current 'BBB-' rating. For the 12 month period ended March 31, 2005, the partnership generated pro forma operating EBITDA (adjusted to include the historical results of GTM through Sept. 30, 2004) of approximately $1.1 billion. Given the continued favorable business climate for virtually all EPD business segments, the partnership remains on track to meet its base case EBITDA target for fiscal year 2005. EPD's issuance of $500 million of new common units in February 2005 enabled EPOLP to permanently retire the remaining bridge debt from the GTM acquisition and provide funding support for growth-related projects. As a result, consolidated credit ratios are in line with Fitch's prior expectations for the rating category. For the 12-month period ended March 31, 2005, total debt to pro forma EBITDA and pro forma EBITDA to interest expense (adjusted to include the historical results of GTM) approximated 3.9x and 4.5x, respectively.