DBRS Comments on TransCanada’s Acquisition of Columbia Pipeline Group Receiving Stockholder Support

DBRS Limited (DBRS) notes that TransCanada Corporation (TCC, or the Company) and Columbia Pipeline Group, Inc. (CPG) announced today that at a special meeting in Houston, Texas, a majority of CPG’s stockholders voted to adopt the previously announced merger agreement, which will have TCC acquire CPG for USD 25.50 per common share in cash, resulting in an aggregate purchase price of approximately USD 13 billion, including approximately USD 2.8 billion of debt (Acquisition). TCC and CPG had announced in May 2016 that regulatory conditions necessary to close the Acquisition had been satisfied, and CPG’s stockholder approval today completes the final major closing condition for the proposed Acquisition to close with an anticipated date of July 1, 2016.

DBRS continues to maintain its status of Under Review with Developing Implications on the Preferred Shares – Cumulative rating of TCC, as well as the Issuer Rating, Unsecured Debentures & Notes, Junior Subordinated Notes and Commercial Paper ratings of TransCanada PipeLines Limited (TCPL). The Under Review with Developing Implications status of the DBRS ratings of TCC’s related issuers, NOVA Gas Transmission Ltd. and Trans Québec & Maritimes Pipeline Inc. remain unchanged. The ratings were placed Under Review with Developing Implications on March 17, 2016, following TCC’s announcement that the Company has entered into an agreement to acquire CPG. Please refer to DBRS press release “DBRS Maintains TransCanada Corporation and TransCanada Pipelines Limited Under Review – Developing,” (June 2, 2016).

TCC plans to finance the Acquisition in line with the Company’s current financial profile, primarily through the sale of its U.S. Northeast merchant power assets and a minority interest in the Company’s Mexican natural gas pipeline business, as well as common equity issuance through a subscription receipts offering of CAD 4.4 billion that closed on April 1, 2016. DBRS notes that, to facilitate the potential timing gap between the Acquisition and the proposed asset sales, TCC has entered into syndicated bridge term loan credit facilities for up to USD 6.9 billion.

DBRS will further review the Acquisition as more information becomes available and aims to resolve the Under Review status once financing details are known and the asset sale transactions have closed.

Notes:
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.

The applicable methodologies are Rating Companies in the Pipeline and Diversified Energy Industry (December 2015), DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (April 2016) and DBRS Criteria: Preferred Share and Hybrid Criteria for Corporate Issuers (January 2016), which can be found on our website under Methodologies.

This rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.