Blog

Our Experts Comment the Times Series

See All the Comments
rss

Shale Gas On Fire

11 August 2014 by HCM

KMI ( Kinder Morgan Inc) announced that it would buy out all of its publicly traded subsidiaries. The move by Kinder, who controls the entities through his 24% stake in the parent company runs counter to the industry trend of spinning off pipelines and oil terminals into tax advantaged partnerships that funnel cash to investors. By simplifying his empire’s corporate structure, Kinder will lower borrowing costs and unify the company under a single that he can use as currency to buy competitors, making it easier “to pursue expansion and acquisitions in a target rich environment” according to the company website. Overall, the company gave a leverage target of 5-5.5x and said all entities would be investment grade. KMI will use cross guaranties among the various entities to create a single creditor class with no structural subordination, on the back of what the spreads of KMI and EP (El Paso LLC) converged towards the spread of KMP ( Kinder Morgan Energy Partners LP)