The likelihood of Energy Transfer Equity (ETE) closing its troubled $37 billion purchase of pipeline owner Williams Cos. (WMB - Get Report) before the June 28 deadline has degraded materially with odds now skewed toward a deal break, analysts at energy-focused investment bank Tudor, Pickering, Holt & Co. wrote in a note Tuesday.

They said the deal has created an overhang across entire Energy Transfer complex, whether directly or not, and while cash flow exists to service its payout to unitholders, that excess is weighted toward affiliates Sunoco Logistics Partners and Sunoco LP.

On Monday Energy Transfer Equity said in a regulatory filing that its law firm Latham & Watkins right now wouldn't be able to deliver a 721 tax opinion, which would allow the deal to be considered a tax-free exchange for stockholders.

It also said it wouldn't pay any dividend next year because of more challenging business conditions, which CreditSights thinks is meant to persuade Williams shareholders to vote against the deal.

The bond research firm gives the deal a 50/50 chance of passing and thinks Energy Transfer Equity could eventually pay Williams $1 billion to $2 billion breakup fee.

Williams filed suit against Energy Transfer Equity and chairman and CEO Kelcy Warren earlier this month over a private unit offering that would guarantee the executive more than $200 million per year in payments at the expense of other shareholders.

The merger was announced in September 2015 for $43.50 per share but the oil and gas industry has significantly deteriorated since then.