- Enbridge Energy Partners (EEP +3.6%) is higher after Morgan Stanley awards it an Overweight rating, even though a distribution cut of as much as 40% is likely when the MLP eventually completes its strategic review.
- Stanley sees a compelling valuation after the units have dropped ~30% since EEP updated investors on its plans in January, with more upside potential depending on how the distribution cut is implemented by parent company Enbridge (ENB -0.7%).
- The firm thinks the strategic review could help EEP if ENB is further supportive by, for example, offering additional and possibly over-equitized drops at attractive multiples with the take-back of units, revamping joint funding agreements, or eliminating the modest incentive distribution rights burden.