Kinder Morgan sells first euro bonds

• Kinder Morgan (NYSE:KMI) sold its first-ever euro denominated bond today, issuing €1.25M of bonds divided into seven- and 12-year tranches, and orders exceeded €4.75M.
• Yields on euro denominated bonds have fallen to record lows as the ECB has entered the market with bond buying program, and U.S. companies have piled in to take advantage; the boom in issuance reflects how U.S. companies are now able to sell eurobonds offering yields 1.5%-1.75% lower than they would have to pay on equivalent bonds issued in the U.S.
• KMI priced the $750M seven-year tranche at 110 bps over the European benchmark mid-swaps and the $500M, 12-year tranche at 145 bps over mid-swaps.

Comments

[rado403]

Remember QE I, II, III--etc took lot longer than anybody thought in the USA--so it might take a really time in Europe before somebody takes away the punchbowl.

[lfbill]

Good management, good succession plan.

[Gene Jaquet]

Makes no sense. The world is littered with financial disasters created when companies borrow in foreign currencies to fund domestic assets, only to get wiped out when exchange rates jolt. Are you sure the euro won't go back to $1.20 or $1.30 in 7 or 12 years time? And all this to save pennies on what are already rock bottom interest costs...

[Smarty_Pants]

"Makes no sense. The world is littered with financial disasters created when companies borrow in foreign currencies to fund domestic assets, only to get wiped out when exchange rates jolt." - Gene Jaquet

They can hedge the Euro/$ in forex markets to mitigate that potential risk.

[TJud]

That's the thing - it's hard to imagine the huge currency risk could be hedged away cheaply, for the slight improvement in rates. It's one thing if you already do euro business, it's another thing if you don't. The hedge costs would be huge given where the euro is way down. Save 1.5% in interest while having up to 40% risk in rates?

This looks like a step to make the short term look better, but costly in the long run. Or it's just a bet that the euro will languish for longer than people expect. Either way, I'm not a fan.

[DrP79]

This may indicate more shipping or other sales to Europe in the future.

[dr_randevil]

hedge for the transatlantic pipeline TBA.

[Uain53]

Lowering the cost of capital. I really appreciate my management team.

[Bbhead]

Sounds good to me..

[Income Machine]

These guys are so smart. Well done

[romilar]

Just when I thought the best niche business in energy couldn't do any more, I discover an extra spoon of icing on the cake....Rom

[spdawley]

Are they going to start building pipelines in Europe? Could be huge for the company.

[Bous Investments]

Kinder knows the markets well. They are always seeking pathways to increase cash flow. As a shareholder, I am very happy with the move. I wish that I could borrow a lot of euro's at a low interest rate.

[darnoc111]

Let's hope that some of the E&P companies try this too.

[Albert Alfonso]

Those should be billions, not millions :)

[TJud]

Remind yourself of that in a few years when the euro isn't at 11 year lows. There's no free lunch. Dipping a toe in the water is fine, selling out on a crazy currency risk is not.

[Dividend Pro]

Very clever.

[thefundamentals]

Smart move. Once the EUR depreciated to $0.80 USD, KMI will save $$$ on its debt servicing.

[surfgeezer]

or, and that is the risk.
Debt servicing could get ugly also, the American dollar is already very strong. Betting on even more future strength is also risky.
I imagine demand will be high, if I lived in Europe I would want American infrastructure to park some cash.

[frosty]

7 and 12 years from now, the Euro likely will be higher representing an add-on to the current interest rate. If indeed the Euro continues to decline, it may represent an opportunity to call the bonds.