Southern Natural Gas Co. (SNG) is an affiliate of El Paso Corp. (B+/Positive/B-3), the largest natural gas pipeline company in North America. The ratings on Houston, Texas-based El Paso and its subsidiaries, including SNG, are based on a consolidated credit method, resulting in the same corporate credit rating for the holding company and each of its subsidiaries. The ratings on El Paso reflect a weak business risk profile burdened by failed unregulated power ventures and the challenges of rehabilitating poorly performing exploration and production (E&P) operations, coupled with an aggressive financial profile based on a leveraged capital structure and considerable debt maturities through 2007. We view a history of accounting and governance issues, including large reserve write-downs, weaknesses in internal
