Fitch Affirms TEPPCO Partners, L.P. Ratings

Business Wire, Feb 4, 2008

CHICAGO -- Fitch Ratings has affirmed the ratings for TEPPCO Partners, L.P. (TPP, Issuer Default Rating (IDR) of 'BBB-') following TPP's release of fourth quarter 2007 financial results and its announcement of the acquisition of the marine assets and associated commercial contracts of Cenac Towing Co., and Cenac Offshore, LLC ('Cenac' collectively) for $500 million.

Fitch has affirmed the following ratings:

TEPPCO Partners L.P.:

--Senior unsecured notes at 'BBB-';

--Junior subordinated notes at 'BB '.

The Rating Outlook is Stable.

Additionally, following the repayment of TE Products Pipeline Company LLC (TE Products) $180 million 6.45% notes due January 2008 and the redemption of its $175 million 7.51% notes due January 2028, Fitch has withdrawn the ratings of TE Products. As of Jan. 31, 2008, there are no further debt obligations at the TE Products level. Repayment of the notes was funded using TPP's $1 billion term credit agreement due December 2008.

TPP's ratings are based on the stability and predictability of cash flows from its pipeline, transportation, gathering and storage operations and the high quality of its underlying assets. With the acquisition of marine assets from Cenac, TPP has expanded its operations to include the marine transport of refined products, crude oil and lube oil which is a natural complement to its existing pipeline and trucking transportation business and its barge terminal facilities in Aberdeen, LA and Boligee, AL. In exchange for the assets, TPP issued $181 million of common units to the owners of Cenac and funded the remaining balance with cash drawn from its $1 billion term credit. Additionally, TPP entered into a Transition Operating Agreement and Master Service Agreement with Cenac which facilitates an orderly transition over two years and provide TPP with access to Cenac's barge maintenance facilities on a priority basis.

TPP's fourth quarter 2007 and fiscal 2007 financial results were in-line with Fitch's expectations. Credit metrics will weaken slightly due to the additional debt related to the Cenac acquisition. However, TPP's credit ratios remain comparable to its peer group and are within Fitch's criteria for its ratings level. Despite the additional leverage, TPP should benefit from further business diversification as well as its high percentage of asset-based revenues and a disciplined approach to selecting and funding capital investments.

Fitch projects 2008-2009 consolidated FFO-to-Total Interest Expense of 3.6 times (x), and FFO-to-Adjusted Debt of 17%, after applying 75% equity treatment to TPP's junior subordinated notes. While these ratios are still in-line with TPP's peers, a further weakening of credit ratios may have a negative effect on TPP's ratings. Fitch expects TPP to periodically issue units to balance the effects of additional leverage from the financing of acquisitions and internal growth projects in order to maintain its investment grade rating.

Company Description

TEPPCO Partners, L.P., ('TPP') is a master limited partnership formed in March 1990. TPP is one of the largest common carrier pipelines of refined products and liquefied petroleum gases in the United States. In addition, TPP owns and operates petrochemical and natural gas liquids pipelines, crude oil transportation, storage, and marketing. TPP also owns significant natural gas gathering systems as well as interests in Seaway Crude Pipeline Company, Centennial Pipeline, Jonah Gas Gathering Company and an undivided interest in the Basin Pipeline.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.