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Fitch Affirms Kinder Morgan, Inc. and Subs. at 'BBB-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'BBB-' Issuer Default Rating (IDR) and senior unsecured ratings on Kinder Morgan, Inc. (KMI) and its subsidiaries, following KMI's announcement of its intent to issue $1.6 billion in mandatory preferred convertible securities. Additionally, Fitch has affirmed its 'F3' short-term IDR and commercial paper (CP) rating on KMI and Kinder Morgan Partners (KMP) and withdrawn KMP's short-term and CP rating. A full list of ratings actions is available at the end of this release. The Rating Outlook is Stable.

The affirmations are reflective of KMI's position as one of the largest and most important energy companies in the U.S., with significant positions in must-run assets that support national energy infrastructure. The ratings are supported by KMI's significant cash flow stability, driven by the high percentage of KMI's assets being either fee-based or hedged and Fitch's expectations that KMI's high percentage of fixed fee-generating assets will minimize earnings and cash flow volatility even as oil and gas prices continue to languish and hedges roll off.

Fitch believes that the issuance of $1.6 billion in preferred equity alleviates some of the uncertainty around KMI's ability and willingness to issue equity given current market weakness. Additionally, KMI recently expanded the range for its public distribution growth guidance for 2016, moving from 10% distribution growth for 2016 to a range of 6% to 10%. Fitch believes the wider guidance should allow KMI to maintain distribution coverage above 1.0x even as commodity prices continue to languish. The wider guidance and preferred offering should provide KMI a fair amount of balance sheet flexibility as it continues to work towards hitting previously stated leverage targets. Fitch continues to expect leverage at KMI on a consolidated basis will be high, above its targeted range of between 5.0x to 5.5x debt/EBITDA, for the next several years as KMI works through a high growth spending backlog. However, Fitch expects near term leverage to be below 6.0x and improve to the targeted range as projects are completed.

Today's ratings actions reflect Fitch's consolidated ratings approach to KMI and its various subsidiaries subject to the cross guarantee agreements among and between the Kinder Morgan entities. The cross guarantees are joint and several, absolute and unconditional, between the entities, and any refinancing of maturing notes is expected be done primarily at the KMI level over time (excepting some pipeline debt which would remain at the pipelines for rate-making purposes but remain cross guaranteed).


Beneficial Size & Scale: KMI is currently the largest midstream infrastructure company in the U.S. possessing a strong, diverse asset portfolio which spans multiple business lines and access and delivers to all of the major supply and demand areas for oil, natural gas and natural gas liquids (NGLs). This helps generate significant stable cash flow, which somewhat offsets concerns around high leverage. The midstream business remains one where size and scale are key differentiating credit factors, as they typically provide earnings and business line diversity, reduced single counterparty exposure, economies of scale, and the ability to offer customers optionality and a variety of services. All of these factors help provide cash flow stability, particularly, in times of commodity price distress.