Rating Action: Moody's assigns Baa3 senior unsecured rating to Targa Resources Corp.'s new notesGlobal Credit Research - 23 Mar 2022New York, March 23, 2022 -- Moody's Investors Service ("Moody's") assigned a first-time Baa3 senior unsecured rating to Targa Resources Corp.'s (TRGP) proposed senior unsecured notes issuance. Concurrently, Moody's affirmed Targa Resources Partners LP's (the Partnership; and together with TRGP, Targa) Baa3 senior unsecured rating. The Partnership is wholly owned by TRGP. The rating outlooks for both entities are stable.TRGP plans to use the proceeds to fund the tender and redemption of the Partnership's 2026 notes and to pay down the TRGP revolver.Assignments:..Issuer: Targa Resources Corp.....Senior Unsecured Regular Bond/Debenture, Assigned Baa3Affirmations:..Issuer: Targa Resources Partners LP....Senior Unsecured Regular Bond/Debenture, Affirmed Baa3Outlook Actions:..Issuer: Targa Resources Corp.....Outlook, Stable..Issuer: Targa Resources Partners LP....Outlook, Remains StableRATINGS RATIONALETarga's Baa3 ratings reflect its increased scale and EBITDA generation, its track record of strong execution of growth projects, and the meaningful and growing proportion of fee-based margin contribution. Targa has increased its geographic diversification, along with a significant presence in the Permian Basin, and improved business diversification. Furthermore, Targa has taken steps to simplify its corporate and capital structures. In early 2022, Targa closed the buy-in of its development company joint ventures from Stonepeak Lonestar Holdings LLC (ratings withdrawn) and the sale of its Gulf Coast Express Pipeline (GCX) equity interest. On the capital structure side, Targa has instituted cross-guarantees so that the debt will be pari passu at both TRGP and the Partnership. Furthermore, Targa has indicated that it expects to start redeeming its preferred shares after the redemption price steps down late in the first quarter of 2022 and may fully redeem the preferred shares upon receipt of proceeds from the sale of GCX expected in the second quarter. These positive attributes are tempered by its material exposure to the gathering and processing business, volatility inherent in natural gas liquids (NGL) prices that makes earnings on its commodity sensitive contracts less predictable, and volume risk.As for the environmental, social and governance (ESG) factors incorporated into the rating, Moody's considered Targa's conservative financial policy as part of its governance profile and reflected that in its G-2 Issuer Profile Score. This financial policy is evidenced by a track record of maintaining moderate leverage and ample liquidity, which positions the company strongly among the similarly rated peers.Targa's improved business and financial profiles will bolster its capacity to withstand negative credit impacts from carbon transition risks. While financial performance of Targa will continue to be influenced by industry cycles, compared to historical experience Moody's expects future profitability and cash flow in this sector to be less robust at the cycle peak and worse at the cycle trough because global initiatives to limit adverse impacts of climate change will constrain the use of hydrocarbons and accelerate the shift to less environmentally damaging energy sources.Targa should maintain good liquidity, underpinned by its strong free cash flow generation and a $2.75 billion credit facility, which will be unsecured going forward as the security fallaway is conditioned upon Targa's achievement of investment grade ratings. At year-end 2021, the company reported $159 million in cash balances. The new revolver matures on February 17, 2027. We expect Targa to maintain some drawings under the revolver, and also up to $100 million in outstanding letters of credit. The credit facility requires Targa to maintain a ratio of debt to EBITDA of under 5.50x. We expect the company to remain in compliance with the covenant into 2023. Targa's next maturity is $963 million in senior unsecured notes in April 2026.The stable outlook on the ratings is supported by the expectation of strong credit metrics and free cash flow generation and maintenance of conservative financial policy.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRatings could be upgraded if Targa maintains conservative financial policies, a resilient asset base with a high level of EBITDA stability in a supportive commodity backdrop, and strong dividend coverage, and if debt/EBITDA is sustained below 3.5x. The ratings could be downgraded if leverage increases above 4.5x, if dividend coverage weakens, or if the company's business profile or financial policy becomes more aggressive.Targa Resources Corp. (TRGP), through its wholly-owned subsidiary Targa Resources Partners LP (the Partnership), operates a portfolio of midstream energy assets that include gathering pipelines, gas processing plants, NGL pipelines, NGL fractionation units, and a marine import/export facility on the Gulf Coast.The principal methodology used in these ratings was Midstream Energy published in February 2022 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1285021. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. 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Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Arvinder Saluja, CFA Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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