NEW YORK May 30, 2006
Standard & Poor's Ratings Services said today that it placed its 'BBB' long-term corporate credit rating on Kinder Morgan Inc. (KMI) and subsidiaries and its 'BBB+' long-term corporate credit rating on master limited partnership Kinder Morgan Energy Partners L.P. (KMP) on CreditWatch with negative implications, following the announced offer by a group of Kinder Morgan management and private investors to buy all of KMI's outstanding common shares.
Standard & Poor's also placed its 'A-2' short-term corporate credit rating on KMI on CreditWatch with negative implications and affirmed its 'A-2' short-term corporate credit rating on KMP.
KMI and KMP, based in Houston, Texas, together have about $13 billion of debt.
The negative CreditWatch listing for KMI is prompted by the group's plans to noticeably increase its financial leverage to fund the purchase. The negative CreditWatch listing for KMP reflects its legal, strategic, and business ties to KMI.
The offer to take KMI private has not yet been evaluated or approved by KMI's board of directors. If the proposal goes forward, Standard & Poor's evaluation of the entire Kinder Morgan enterprise to resolve the CreditWatch listings will focus on the greater debt burden and future composition of business activities at KMI, and any legal or governance changes at KMP that may affect our view of the ratings linkage between the two entities.
"The sharp increase in debt contemplated in the KMI buyout offer would likely lead to a multiple notch ratings downgrade into the 'BB' category," said Standard & Poor's credit analyst Todd Shipman.
"KMP is not directly involved with the proposed transaction, but its ratings are currently closely tied to KMI's credit quality and would probably be affected by any rating action on KMI," said Mr. Shipman.
Standard & Poor's also said that KMP's 'A-2' commercial paper rating was affirmed based on the strong possibility that governance and other steps will be taken at the partnership to substantially insulate KMP from KMI. Any steps taken in that regard could also justify a wider ratings differential between the two companies.
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