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Rating Action:

Moody's downgrades Kinder Morgan ratings

30 May 2007
Moody's downgrades Kinder Morgan ratings

About $16 billion of debt affected

New York, May 30, 2007 -- Moody's Investors Service downgraded the ratings of Kinder Morgan, Inc. (KMI) and its MLP affiliate Kinder Morgan Energy Parters, L.P. (KMP) with the consummation of the $20 billion management buy-out (MBO) of KMI. Moody's rating actions end the rating reviews that were initiated on 5/30/06 when the MBO was first announced. The companies' new ratings are consistent with those indicated in Moody's press release of 11/14/2006 and Issuer Comment of 4/11/2007.

KMI is assigned a Corporate Family Rating (covering KMI only) of Ba2 and a probability of default rating of Ba2; its senior notes (formerly senior unsecured but now guaranteed and secured pari passu with its new credit facilities) are downgraded to Ba2 senior secured from Baa2; its new senior secured credit facilities are assigned definitive ratings of Ba2 and their (P)Ba2 provisional ratings withdrawn; its trust preferred obligations are downgraded to B1 from Baa3. KMI's prior credit facility rating, shelf ratings, and Prime-2 commercial paper rating are withdrawn. The ratings of KMP's senior unsecured and supported debt are downgraded to Baa2 from Baa1, its senior unsecured/subordinated shelf ratings to (P)Baa2/(P)Baa3 from (P)Baa1/(P)Baa2, and its commercial paper rating confirmed at Prime-2. The rating outlooks for both companies are stable.

"The downgrades of KMI's ratings reflect its debt increasing by about a quarter and its EBITDA decreasing by about a third from the MBO and recent asset sales" says Moody's Vice President Mihoko Manabe. "KMI will be comfortably positioned within the Ba2 rating category at the outset, and the ratings anticipate further potential restructuring over the next few years."

KMP's ratings are downgraded, though to a lesser degree than KMI's, as a result of the MBO. The notching recognizes the separateness of KMP's operations and corporate governance from those of KMI, its general partner sponsor. However, the MBO raises the potential for dividend pressure on KMP and credit-negative event risk that could stem from KMI's increased reliance on KMP to generate growing cash flows to help service the almost $5 billion of MBO-related debt. While recent asset sales have reduced the debt KMI needed to implement the MBO, they have eliminated sources of cash flow, so that KMI is left primarily with its interests in KMP (almost 60% of EBITDA pro forma for asset sales) and Natural Gas Pipeline Company of America (the remaining 40% of KMI's pro forma EBITDA).

Pro forma for the MBO, KMI's debt/EBITDA will go up from roughly 5x (on a standalone basis, not consolidated with KMP, pre-MBO) to the 6x range. KMP is not directly affected by the MBO, with its debt/EBITDA in the high 3x range.

As a speculative grade issuer, KMI's ratings were notched in accordance with Moody's Loss Given Default methodology. With a Corporate Family Rating of Ba2, KMI's credit facilities were rated Ba2 and a loss given default of LGD 3 (LGD 3, 49%). KMI and Kinder Morgan Finance Company, ULC's senior unsecured debt were re-classified as senior secured debt and downgraded to Ba2 (LGD 3, 49%) from Baa2. The trust preferred securities of KN Capital Trust I and III were downgraded to B1 (LGD 6, 96%) from Baa3. The full list of ratings affected is as follows:

Downgrades:

..Issuer: Harris (County of) TX, I.D.C.

....Senior Unsecured Revenue Bonds, Downgraded to Baa2 from Baa1

..Issuer: K N Capital Trust I

....Preferred Stock Preferred Stock, Downgraded to B1 from Baa3

....Preferred Stock Preferred Stock, Downgraded to B1 from Baa3

..Issuer: K N Capital Trust III

....Preferred Stock Preferred Stock, Downgraded to B1 from Baa3

....Preferred Stock Preferred Stock, Downgraded to B1 from Baa3

..Issuer: Kinder Morgan Energy Partners, L.P.

....Multiple Seniority Shelf, Downgraded to a range of (P)Baa3 to (P)Baa2 from a range of (P)Baa2 to (P)Baa1

....Senior Unsecured Bank Credit Facility, Downgraded to Baa2 from Baa1

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa2 from Baa1

..Issuer: Kinder Morgan Finance Company, ULC

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

..Issuer: Kinder Morgan, Inc.

....Junior Subordinated Regular Bond/Debenture, Downgraded to B1 from Baa3

....Junior Subordinated Regular Bond/Debenture, Downgraded to B1 from Baa3

....Senior Unsecured Regular Bond/Debenture, Downgraded to B2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa2

..Issuer: New Jersey Economic Development Authority

....Senior Unsecured Revenue Bonds, Downgraded to Baa2 from Baa1

..Issuer: South Louisiana Port Commission

....Senior Unsecured Revenue Bonds, Downgraded to Baa2 from Baa1

Assignments:

..Issuer: K N Capital Trust I

....Preferred Stock Preferred Stock, Assigned 96 - LGD6

....Preferred Stock Preferred Stock, Assigned 96 - LGD6

..Issuer: K N Capital Trust III

....Preferred Stock Preferred Stock, Assigned 96 - LGD6

....Preferred Stock Preferred Stock, Assigned 96 - LGD6

..Issuer: Kinder Morgan Finance Company, ULC

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

..Issuer: Kinder Morgan, Inc.

....Probability of Default Rating, Assigned Ba2

....Corporate Family Rating, Assigned Ba2

....Junior Subordinated Regular Bond/Debenture, Assigned 96 - LGD6

....Junior Subordinated Regular Bond/Debenture, Assigned 96 - LGD6

....Senior Secured Bank Credit Facility, Assigned a range of 49 - LGD3 to Ba2

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

....Senior Unsecured Regular Bond/Debenture, Assigned 49 - LGD3

Outlook Actions:

..Issuer: K N Capital Trust I

....Outlook, Changed To Stable From Rating Under Review

..Issuer: K N Capital Trust III

....Outlook, Changed To Stable From Rating Under Review

..Issuer: Kinder Morgan Energy Partners, L.P.

....Outlook, Changed To Stable From Rating Under Review

..Issuer: Kinder Morgan Finance Company, ULC

....Outlook, Changed To Stable From Rating Under Review

..Issuer: Kinder Morgan, Inc.

....Outlook, Changed To Stable From Rating Under Review

Confirmations:

..Issuer: Kinder Morgan Energy Partners, L.P.

....Senior Unsecured Commercial Paper, Confirmed at P-2

Withdrawals:

..Issuer: Kinder Morgan, Inc.

....Multiple Seniority Shelf, Withdrawn, previously rated (P)Baa3

....Senior Unsecured Bank Credit Facility, Withdrawn, previously rated Baa2

....Senior Unsecured Commercial Paper, Withdrawn, previously rated P-2

....Senior Unsecured Commercial Paper, Withdrawn, previously rated P-2

..Issuer: K N Capital Trust II

....Preferred Stock Shelf, Withdrawn, previously rated (P)Baa3

Headquartered in Houston, Texas, Kinder Morgan, Inc. and Kinder Morgan Energy Partners, L.P. are midstream energy companies.

New York
John Diaz
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Mihoko Manabe
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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