- Morgan Stanley calls Kinder Morgan‘s (KMI, KMP) decision to abandon the MLP structure a “watershed event” and a “prudent decision” that leaves the company better positioned and with favorable tax advantages.
- The Stanley analysts say the major implications of the deal for the MLP marketplace include the return of large-cap midstream stocks such as WMB and ETE to the M&A hunt as they continue to find different ways to repair cost of capital challenges, and the MLP structure's trajectory that becomes more challenged as the MLP’s size/GP burden and the parent’s size both grow larger, likely necessitating restructuring.
- The firm sees some downside for KMI with the move, as the cash flow generation of assets remains the same, equity financing needs are ongoing, and risks around certain legacy businesses (particularly the CO2 assets) coupled with the sheer size of KMI could still serve as headwinds.