Business Context and Reporting Period
Company: Kinder Morgan, Inc. (KMI)
Filing Type: Form 8-K (Current Report)
Date of Report: June 16, 2017
Event: Entry into a Material Definitive Agreement regarding the Trans Mountain expansion project.
Key Financial Metrics and Facility Details
This filing details a new Credit Agreement entered into by two subsidiaries of Kinder Morgan Canada Limited (KML): Kinder Morgan Cochin ULC and Trans Mountain Pipeline ULC. KMI holds an approximately 70% economic interest in these entities.
- Total Credit Facilities: CAD $5.5 billion in aggregate revolving facilities.
- Construction Facility: CAD $4.0 billion for development, construction, and completion of the Trans Mountain expansion project.
- Contingent Facility: CAD $1.0 billion for additional project costs and Canadian National Energy Board-mandated liquidity requirements.
- Working Capital Facility: CAD $500 million for general corporate purposes.
- Maturity Date: June 16, 2022.
- Interest Rates:
- Canadian Prime + 0.50% to 1.50% per annum.
- U.S. Base Rate + 0.50% to 1.50% per annum.
- LIBOR + 1.50% to 2.50% per annum.
- Standby Fees: 0.300% to 0.625% per annum on unused portions.
Material Changes and Covenants
The Credit Agreement introduces specific financial covenants and restrictions for the Borrowers and guarantors (collectively, the "Obligors").
- Debt-to-Capitalization Ratio: Maximum consolidated total funded debt to consolidated capitalization of 70%.
- Equity Commitment: KMI entered into an Equity Nomination and Support Agreement. KMI commits to contributing equity to Cochin at the time of each drawdown to ensure indebtedness does not exceed 60% of total projected project costs over the subsequent six-month period.
- Restrictions: Limitations on incurring additional debt, granting liens, making dispositions, engaging in affiliate transactions, making restricted payments, and corporate reorganizations.
- Security: Obligations are guaranteed by KML and other subsidiaries, secured by first priority security interests in assets, and a pledge of partnership interests.
Outlook, Risks, and Contingencies
Events of Default: The agreement includes customary events of default, including non-payment, non-compliance with covenants, payment defaults on other indebtedness, bankruptcy/insolvency, and a change in control of Cochin. Upon a continuing default, lenders may terminate commitments and accelerate maturity.
Management Commentary: The filing does not provide specific management commentary on future earnings or operational outlook beyond the execution of this financing agreement.
Unusual Items: The filing notes that portions of the Credit Agreement exhibit were omitted pursuant to a Confidential Treatment Application.
Investor Verification Checklist
- Verify the current credit ratings of Cochin, KML, and KMI, as interest margins and standby fees are tied to these ratings.
- Confirm the projected total project costs for the Trans Mountain expansion to assess the 60% debt-to-cost equity commitment threshold.
- Review the consolidated balance sheet to ensure compliance with the 70% maximum funded debt to capitalization ratio covenant.
- Monitor the status of the Canadian National Energy Board-mandated liquidity requirements referenced in the contingent facility.
- Check for any subsequent filings regarding changes in control of Cochin or acceleration of debt obligations.