KINDER MORGAN, INC. current report, 16 June 2017

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.