Regency Energy (RGP), Energy Transfer (ETP) Ratings Placed on Review by Moody's

Moody's Investors Service (Moody's) placed under review for upgrade Regency Energy Partners LP's (NYSE: RGP) Ba2 Corporate Family Rating (CFR) and its Ba3 unsecured notes rating. Moody's affirmed Energy Transfer Partners, L.P.'s (NYSE: ETP) Baa3 rating and stable outlook. These rating actions were prompted by ETP's January 26 announcement that it would acquire Regency in a transaction valued at approximately $18 billion. The transaction has no impact on the Ba2 CFR or stable outlook of Energy Transfer Equity, L.P. (ETE), who holds the general partnership (GP) interest in both ETP and Regency.

"Weak energy commodity prices have pressured valuations in the gathering and processing (G&P) segment of the midstream energy sector," commented Andrew Brooks, Moody's Vice President. "Financing the continuing growth of Regency's investment in G&P will benefit from ETP's investment grade balance sheet and lower cost of capital, while ETP will gain additional scale and scope across its diversified midstream asset base through the Regency acquisition."

On Review for Upgrade:

..Issuer: Regency Energy Partners LP

.... Probability of Default Rating, Placed on Review for Upgrade, currently Ba2-PD

.... Corporate Family Rating (Local Currency), Placed on Review for Upgrade, currently Ba2

....Senior Unsecured Regular Bond/Debentures (Local Currency), Placed on Review for Upgrade, currently Ba3 (LGD4)

Affirmations:

..Issuer: Energy Transfer Partners, L.P.

....Junior Subordinated Regular Bond/Debenture (Local Currency), Affirmed Ba1

....Senior Unsecured Regular Bond/Debentures (Local Currency), Affirmed Baa3

Outlook Actions:

..Issuer: Energy Transfer Partners, L.P.

....Outlook, Remains Stable

..Issuer: Regency Energy Partners LP

....Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

ETP and Regency, both publicly traded master limited partnerships (MLPs), are each controlled through GP interests held by ETE. ETE also holds a 14.1% limited partnership (LP) interest in Regency, while ETP, through a 2013 intra-company transaction, holds a 9.3% LP interest in Regency. The transaction will roughly double the contribution of ETP's existing G&P operations to its consolidated EBITDA from approximately 12% to 23% on a pro forma basis, adding additional scale to its already sizable midstream asset base. The complementary nature of the combined G&P businesses also promises significant savings through shared efficiencies and a rationalization of corporate G&A.

As proposed, ETP will issue new common units to acquire 100% of the outstanding common units of Regency (including those held by ETP and ETE) in an all units transaction. Moody's review for upgrade reflects our understanding that ETP will assume Regency's approximate $5.1 billion in unsecured notes. Additionally, ETP will terminate Regency's $1.5 billion revolving credit facility, under which $689 million was outstanding at September 30. Reflecting the extent of ETP equity used in the financing the acquisition, ETP's debt leverage will remain relatively unchanged at approximately the 4.4x debt/EBITDA (including Moody's standard adjustments) reported on a proportionately consolidated, run rate basis as of September 30.

The combination brings an element of simplification to the historically complex organizational structure characterizing the Energy Transfer family, beyond solving for the 70%/30% ETP/Regency ownership in Lone Star NGL LLC, their jointly owned natural gas liquids (NGL) logistics operating company. Moreover, the fee-based component of consolidated cash flows will remain essentially unchanged at approximately 75% pro forma for the acquisition.

ETP expects the transaction, which its Board has approved, to close in 2015's second quarter. The transaction will require unit holder votes by both ETP and Regency. Moody's expects to conclude its review as the closing date of the transaction approaches, upgrading Regency's unsecured notes rating to that of ETP's Baa3 rating, presuming the assumption by ETP of Regency's debt results in Regency's debt becoming pari to that of ETP's existing unsecured notes.

The principal methodology used in these ratings was Global Midstream Energy published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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