TEXT-Moody's release on Regency Energy Partners

(The following statement was released by the rating agency)

About $850 million of rated obligations affected

Sept 11 - Moody's Investors Service upgraded the ratings of Regency Energy
Partners LP (RGNC.O) (Regency, the MLP) following a sizable equity offering and
the repayment of debt with the proceeds. Regency's Corporate Family Rating
(CFR) is upgraded to Ba3 from B1 and its senior unsecured notes, to B1 from B2.
Its operating subsidiary Regency Gas Services LP's (the OLP) ratings (the
senior secured revolver rating of Ba1 and related SGL and LGD ratings) were
confirmed and withdrawn. An SGL-3 rating is assigned to the MLP. The rating
outlook is stable. These rating actions conclude a review for possible upgrade
begun on July 23, 2007.
In July, Regency raised $354 million in net proceeds in a public equity
offering that allowed it to almost halve its debt and almost triple its book
equity from 6/30/07 levels. Since then, the company has paid down $193 million
of the $550 million of MLP notes and eliminated the OLP's $50 million term
loan. After the $16 million make-whole payment, it used the remaining $95
million of proceeds to free up most of the capacity under the OLP's $250
million revolver.
These transactions have significantly improved the company's leverage metrics
and have restored some headroom under its financial covenants. Pro forma for
the reduction of the MLP notes and the elimination of the term loan,
debt/EBITDA would have been about 3.6x for the LTM 6/07, down from 6.7x actual
(adjusted for Moody's standard adjustments).
Moody's notes that the upgrade reflects expectations for of some improvement in
financial results, as Regency's recent financial results are still of single-B
quality. The company reported net losses in three of the last four quarters,
generating very modest earnings after adjusting for such unusual items as
incentive compensation expense, early debt retirement costs, and payments to
its prior general partner sponsor. Nevertheless, numerous organic projects that
have been recently completed should begin to augment top-line margins in the
second half of this year. The debt reduction should cut about a third of recent
interest expense and improve interest coverage measures, so long as the company
has success in stanching further increase in operating expenses.
EBITDA/interest for LTM 6/07, after Moody's standard adjustments, would have
been about 2.7x pro forma for the debt reduction, up from 2.1x actual.
The rating strongly factors in anticipation of more credit-supportive financial
policies going forward, and takes the equity offering as a positive signal as
to the company's future financial policy under its sponsorship by GE Energy
Financial Services (GE). GE acquired a controlling stake in Regency's general
partner sponsor and about a third of its LP units in June. Since the change in
sponsorship, Regency has stated a goal of attaining investment grade status
over the next few years, and intends to follow appropriate financial policies
to that end.
It is too early to tell if and how GE's sponsorship will affect Regency's
strategic direction. GE does have a number of energy investments that qualify
to be placed in an MLP like Regency, and those interests have the potential to
influence its future growth and business mix.
Regency's senior unsecured debt was upgraded to B1 (LGD 5, 79.1%) from B2. The
full list of ratings affected is as follows:
Downgrades:
..Issuer: Regency Energy Partners LP
....Senior Unsecured Regular Bond/Debenture, Downgraded to 79 - LGD5 from 69 -

LGD4
Upgrades:
..Issuer: Regency Energy Partners LP
....Probability of Default Rating, Upgraded to Ba3 from B1
....Corporate Family Rating, Upgraded to Ba3 from B1
....Senior Unsecured Regular Bond/Debenture, Upgraded to B1 from B2
Assignments:
..Issuer: Regency Energy Partners LP
....Speculative Grade Liquidity Rating, Assigned SGL-3
Outlook Actions:
..Issuer: Regency Energy Partners LP
....Outlook, Changed To Stable From Rating Under Review
..Issuer: Regency Gas Services LP
....Outlook, Changed To Rating Withdrawn From Rating Under Review
Withdrawals:
..Issuer: Regency Gas Services LP
....Speculative Grade Liquidity Rating, Withdrawn, previously rated SGL-3
....Senior Secured Bank Credit Facility, Withdrawn, previously rated 14 - LGD2
The OLP's ratings were withdrawn for business reasons. Please refer to Moody's
Withdrawal Policy on moodys.com.
Headquartered in Dallas, Texas, Regency Energy Partners LP is a publicly traded
master limited partnership engaged in natural gas gathering, processing, and
transportation.