Kinder Morgan deal favors riskier entities at expense of investment-grade KMP

|About: Kinder Morgan, Inc. (KMI)|By:, SA News Editor

Kinder Morgan's (KMI +3.1%) consolidation move has created a windfall for bondholders who invested in the energy empire’s riskiest securities, as credit protection is transferred from Kinder Morgan Energy Partners (KMP +2.9%) to KMI and El Paso Pipeline Partners (EPB +2.8%).

Creditors of KMI and EPB have seen the market value of their notes rise $468M, while securities of investment-grade Kinder Morgan Partners lost $85M since the Aug. 10 announcement that the three units plus the debt-free Kinder Morgan Management (KMR +3.2%) would be rolled into one.

Collapsing the corporate structure makes KMI less risky, says Moody's Stuart Miller, in part because it will give the pipeline and terminals company direct access to KMP's cash flows.

Moody’s is planning to raise KMI and EPB to Baa3 and decrease KMP to that level.