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

  • 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.
Comments (15)
  • DaceR
    , contributor
    Comments (13) | Send Message
     
    Kind of sounds like the KMP stockholders are getting a bit of a raw deal... maybe they should be compensated a bit better in this transition..
    15 Aug 2014, 01:34 PM Reply Like
  • toomuchgas
    , contributor
    Comments (681) | Send Message
     
    KMP stockholders are doing all right. Many had more than one part of the combined companies. I had KMP stock and EPB bonds both of which had a nice increase.
    15 Aug 2014, 01:58 PM Reply Like
  • richjoy403
    , contributor
    Comments (10444) | Send Message
     
    Those that had not learned before that ALL change comes with both winners and losers...know it now.
    15 Aug 2014, 02:10 PM Reply Like
  • fredjohnson3
    , contributor
    Comments (44) | Send Message
     
    My KMR has gone from $76 to $100(as of today) in one week. I'm not complaining and none of you should be either unless of course you were foolish enough to short these stocks.
    15 Aug 2014, 03:08 PM Reply Like
  • NV_GARY
    , contributor
    Comments (3072) | Send Message
     
    Any idea why KMR is about 2% below conversion value today?
    15 Aug 2014, 03:24 PM Reply Like
  • Ruffdog
    , contributor
    Comments (1784) | Send Message
     
    The only ones that are complaining are the shorts, and anyone that bets against Rich Kinder deserves what they got!

     

    I had sold calls against my KMP and am very happy with my KMP 85 dollar strike price. Will have all my EPB converted to KMI.

     

    Long EPB and KMP and getting longer with the dividend that was posted to my account that is directly reinvested.
    16 Aug 2014, 10:01 AM Reply Like
  • richjoy403
    , contributor
    Comments (10444) | Send Message
     
    Ruffdog -- If you are under the impression "only the shorts" are complaining, you have not been reading articles regarding Kinder's Sunday announcement...

     

    MANY being unexpectedly hit with tax bills are crying all the way to the bank.

     

    Rich
    16 Aug 2014, 10:12 AM Reply Like
  • Ruffdog
    , contributor
    Comments (1784) | Send Message
     
    I am smiling all the way to the bank,
    the jump is stock price of my EPB and KMP will be much more that my tax bill. It is a great deal; thank you Richard Kinder
    17 Aug 2014, 10:48 AM Reply Like
  • TDCtopdeadcenter
    , contributor
    Comments (20) | Send Message
     
    I'm not sure I understand how this is a win for KMP holders who have to pay a big chunk of TAX ?? Can somebody help me out All I see is a big bill--- ?
    16 Aug 2014, 11:07 AM Reply Like
  • jimsbirds
    , contributor
    Comments (5) | Send Message
     
    I don't understand why holders of KMP are complaining. I guess you would rather see KMP around 80.00 and not have to pay taxes. Pretty stupid I think.
    16 Aug 2014, 01:41 PM Reply Like
  • dgswanson
    , contributor
    Comments (16) | Send Message
     
    Okay, now I'm more confused: the value of KMP was set on 8.8.14, the Friday before the announcement of the consolidation. KMP units have increased considerably since then. When the consolidation closes, do KMP unitholders receive the 8.8.14 price or the price on the day of closing??
    16 Aug 2014, 02:31 PM Reply Like
  • richjoy403
    , contributor
    Comments (10444) | Send Message
     
    dg -- It may be helpful to read this article:
    http://bit.ly/1mUWgsq

     

    There are also at least 5 others on the topic; just put KMP or KMI into the search box above.

     

    Also keep in mind KMI's shifting share price when considering the value of KMP shares to be converted into KMI shares.
    16 Aug 2014, 02:38 PM Reply Like
  • dgswanson
    , contributor
    Comments (16) | Send Message
     
    Thanks, rich'....I had read the others, but missed that one. Appreciate it.
    22 Aug 2014, 10:05 PM Reply Like
  • richjoy403
    , contributor
    Comments (10444) | Send Message
     
    dg -- You are quite welcome, my pleasure.
    23 Aug 2014, 08:03 AM Reply Like
  • Northwest Investor
    , contributor
    Comments (1426) | Send Message
     
    As I have stressed before, and many apparently do not know, Richard Kinder owns a great deal of KMI, but very little of KMP.

     

    That explains the "who wins, who loses" of this transaction.

     

    An additional note: If Kinder felt pressure from the lawsuit alleging that KMI was inequitably allocating funds that were rightfully KMP's (this relates to the "maintenance" vs "expansion" issue), in this purchase he makes that issue go away.

     

    All in all, it's a lousy deal for the longtime KMP holder -- the longer you've held KMP, the worse it is.
    26 Aug 2014, 01:45 PM Reply Like
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