Atlas Pipeline Partners LP (APL) said Monday the company has amended a debt agreement, improving Atlas Pipeline's financial flexibility as the company struggles with a heavy debt load and meager cash flows.

Falling gas demand and tumbling commodity prices during the recession have been squeezing small pipeline operators like Moon Township, Pa.-based Atlas Pipeline, leading it to put transmission and gathering systems on the sales block.

Atlas Pipeline's amended debt agreement comes days after Standard & Poor's Ratings Services lowered its credit ratings for the company deeper into junk territory, saying the company's cash flow could significantly decline amid lower natural gas prices and the fact that the company has hedged only a small part of its equity volume.

"Although we were fully compliant with all covenants under the facility, and expected to remain compliant, the amendment significantly increases our operating liquidity and offers relaxed (earnings) and total debt covenants, providing Atlas Pipeline with substantially increased cushions against possible future negative developments," Atlas Chief Executive Gene Dubay said in a prepared statement.

Under the amended agreement, which pertains to a $380 million revolving credit facility and a $463 million term loan, certain debt and earnings requirements have been eased through Dec. 31, 2010. A "reinvestment basket," which allows Atlas Pipeline to use cash proceeds from asset sales for up to 12 months before reinvestment, has almost tripled to $135 million. Atlas can make capital expenditures up to $95 million for the rest of 2009.

"The amendment certainly helps us in this environment," Atlas spokesman Brian Begley said. "It allows us to focus on our operations."

Lenders also approved a natural gas gathering and processing joint venture agreement with Williams Cos. (WMB). Under that agreement, announced in April, Williams will own 51% of the venture and operate Atlas Pipeline's Appalachian basin gathering system in the Marcellus Shale.

The amended debt agreement improves Atlas' near-term credit profile, but the company's ratings and outlook remain unchanged, Standard & Poor's analyst Michael Grande said in a note to clients Monday.

"We believe (the amendment) should provide Atlas with additional liquidity, increased financial covenant headroom, and additional funds to invest in the business...under certain conditions," Grande wrote.

Atlas Pipeline shares closed down 18 cents, or 3.4%, to $5.41 Monday. Shares are down 87% from the 52-week high of $42.63.

-By Christine Buurma, Dow Jones Newswires; 201-938-2061; christine.buurma@dowjones.com