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Kinder Morgan Capital Raise via Depository Shares

Kinder Morgan Inc. (NYSE: KMI) managed to raise its dividend last week on a moderated level, but the company said with results that it was planning alternative sources of funding outside of an equity issuance to get through mid-2016 on its capital plan. Despite Wall Street understanding and expecting that Kinder Morgan would seek an undefined and unspecified capital raising effort, it turns out that Kinder Morgan’s filing shows how it is raising capital via depository shares.

Kinder Morgan’s SEC filing shows that it is offering 32,000,000 depositary shares, each of which represents a 1/20th interest in a share of its pending Series A Mandatory Convertible Preferred Stock. Prior to this offering, there has been no public market for the depositary shares. The company is applying to list the depositary shares on the New York Stock Exchange under the symbol “KMI.PRA.”

The filing showed the following under its description:

Dividends on our mandatory convertible preferred stock will be payable on a cumulative basis when, as and if declared by our board of directors, or an authorized committee of our board of directors, at an annual rate of % on the liquidation preference of $1,000 per share. We may pay declared dividends in cash or, subject to certain limitations, in shares of our Class P common stock, par value $0.01 per share (our “common stock”), or in any combination of cash and common stock, on January 26, April 26, July 26 and October 26 of each year, commencing on January 26, 2016 and ending on, and including, October 26, 2018.

Here are the details of the mandatory convertible offering, and the company filed for capital raises under the entities Kinder Morgan Terminals Wilmington and Kinder Morgan Galena Park West.

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