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Kinder Affirms Commitment to 'Investment Grade'

Three days after Moody's Investors Service changed its outlook on Kinder Morgan Inc. (KMI) debt to "negative" from "stable," the company said it "...will construct its 2016 plan to maintain an investment grade rating with all three [credit rating] agencies."

During KMI's third quarter earnings conference call, the company said it expected 2016 growth to range 6-10% over its targeted dividend of $2.00/share. That was a reduction from previous expectations (see Daily GPIOct. 22). The company said Friday that the distributable cash flow of "slightly over $5 billion" it expects to generate would be sufficient to to support dividend growth in the 6-10% range.

"Alternatively, this cash flow can be used to fund some or all of KMI's equity needs for 2016," it said. "KMI's board will be reviewing the dividend policy and financing plans in the coming days and the company will announce that policy and plan when finalized. KMI will construct its 2016 plan to maintain an investment grade rating with all three agencies. Further, KMI does not plan to issue equity at current prices."

On Tuesday, Moody's lowered its outlook on KMI but affirmed its "Baa3" senior unsecured and Prime-3 commercial paper ratings. The action followed the announcement that KMI would increase its stake in Natural Gas Pipeline Company of America LLC (NGPL), which it operates (see Daily GPIDec. 1).

"The 'negative' outlook reflects Kinder Morgan's increased business risk profile and additional pressure on its already high leverage that will result from its agreement to increase ownership in NGPL, a distressed company," said Terry Marshall, Moody's senior vice president. "NGPL is facing potential default on its pending interest payments, suggesting that KMI will need to provide cash injections, which will likely be debt funded initially."

Standard & Poor's Ratings Services said its ratings and outlooks on KMI and NGPL PipeCo LLC were unaffected by the deal. Fitch Ratings said the transaction was credit-neutral for KMI.

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