DBRS Places Kinder Morgan Energy Partners, L.P. and Kinder Morgan, Inc. Ratings Under Review

DBRS has today placed the Issuer Rating and Medium-Term Notes & Unsecured Debentures rating of BBB (high) for Kinder Morgan Energy Partners, L.P. (KMP) Under Review with Negative Implications. Concurrently, DBRS has placed the Issuer Rating and Senior Notes and Debentures rating of BB (Recovery Rating RR4) for Kinder Morgan Inc. (KMI) Under Review with Positive Implications.

The rating action follows the announcement that KMI will consolidate its subsidiaries under a single corporate structure by acquiring all of the outstanding equity securities of KMP, Kinder Morgan Management, LLC and El Paso Pipeline Partners LP for approximately $44 billion. The acquisition is expected to be financed with $40 billion of KMI equity and $4 billion of debt. In addition, KMI is expected to assume $27 billion of subsidiary debt. KMI has stated that cross guarantees will be put in place among KMI, KMP and substantially all wholly owned operating subsidiaries, effective on closing of the transaction, in order to create a single creditor class and eliminate the structural subordination at KMI. The transaction is expected to close in Q4 2014 and is subject to shareholder and regulatory approvals. DBRS notes that the transaction has a positive implication for debtholders at KMI, as they will no longer be structurally subordinated to debt at subsidiaries. At the same time, KMP’s debtholders will be negatively affected, as they will no longer be structurally senior to creditors at KMI under the proposed single creditor class.

DBRS expects to resolve the affected ratings after the close of the transaction, as details become available.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is Rating Pipeline and Diversified Energy Companies (January 2014), which can be found on our website under Methodologies.