Houston, TX-based oil and gas pipeline company, Kinder Morgan, Inc. (KMI) has sold $6 billion of senior notes. According to data compiled by Bloomberg on this matter, $1.75 billion carry a coupon rate of 5.55%, and two separate blocks of $1.5 billion worth of notes carry a coupon rate of 4.3% and 3.05%. The company also issued securities worth $750 million with coupon rate of 5.3% and $500 million with coupon rate of 2%.
The proceeds from the transaction would be used to finance the cash portion of the merger consideration for Kinder Morgan Energy Partners, L.P. (KMP) and El Paso Pipeline Partners, L.P (EPB), and for its related fees cum expenses. The notes’ issuance has been assigned a credit rating of 'BBB-' by Fitch Ratings.
On Aug 10, 2014, the company announced that it will acquire all of the outstanding equity securities of KMP; Kinder Morgan Management, LLC (KMR); and El Paso Pipeline Partners in a transaction valued at over $71 billion.
The combined entity, once operational, will represent the largest energy infrastructure company in North America and the third-largest energy company globally. It is estimated to have an enterprise value of about $140 billion. The transaction is expected to close on Nov 26, 2014.
Further, the acquisition will simplify the structure of the Kinder Morgan group of companies, benefiting all shareholders and unitholders. Kinder Morgan is projected to return a dividend of $2.00 per share in 2015, up 16% from the estimated $1.72 in 2014. Management expects the dividend to increase by about 10% each year from 2015 through 2020. Over the same period, excess coverage is anticipated to exceed $2 billion.
The transaction will provide KMI shareholders with significant tax benefits from depreciation deductions related to the upfront purchase and future capital expenditures.
Additionally, the company will have a leading position in each of its business segments, and operate in the swiftly growing North American energy infrastructure sector. The company operates approximately 80,000 miles of pipelines transmitting natural gas, refined petroleum products, crude oil, carbon dioxide and additional products. It has more than 180 terminals that store petroleum products and chemicals, along with ethanol, coal, petroleum coke and steel.
Currently, Kinder Morgan carries a Zacks Rank #3 (Hold).
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