Enbridge: Transaction is credit positive, simplifies debt structure

By Devika Patel

Knoxville, Tenn., May 17 – Enbridge Inc. plans to simplify its debt structure by eliminating the structural subordination of certain debt within the Enbridge family once it completes its planned all-share proposals to acquire, in separate combination transactions, all of the outstanding equity securities of some sponsored vehicles not already owned by Enbridge.

The vehicles are Spectra Energy Partners, LP, Enbridge Energy Partners, LP, Enbridge Energy Management, LLC and Enbridge Income Fund Holdings Inc.

The company believes the transaction will be credit positive and has talked to debt ratings agencies about its plans and expects the agencies will view the transaction positively.

“There’s a number of different ways that we can effect some of the complexity and structural subordination within the group,” executive vice president and chief financial officer John Whelen said on the company’s business update call on Thursday.

“We’ll be thinking about all of that as we move through this next phase.

“There’s debt at various levels of the structure and we’ve been working away over time on simplification exercises.

“We did one where we largely eliminated the debts that would have existed at the Spectra Corp. level, post-merger.

“So we’ll consider all of those different things as we go to look finalize the debt structure and we see how these roll-out transactions actually work,” Whelen said.

The transaction will be a positive step in regards to credit and funding.

“It’s positive from a credit and funding perspective as 100% of the cash flows generated by our assets would be kept in the family and not paid out in third-party distributions,” president and chief executive officer Al Monaco said on the call.

“The cash flow that we’re retaining from not paying out the distributions is held in house so that is helpful from a credit point of view.

“The credit metrics really are the same because we prepare that on a consolidated basis, so the cash is still the cash and the overall debt is still the same, so the metrics per se don’t change.

“We think this will be credit positive,” Monaco said.

The company believes the debt ratings agencies will also see this move as credit positive.

“We’ve been keeping in very close contact with [with the debt rating agencies] and I think they will view it positively,” Whelen said.

The oil and gas distribution and transportation company is based in Calgary, Alta.

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