S&P changes Enbridge view to negative

S&P said it changed its outlook for Enbridge Inc. to negative from stable and affirmed its ratings, including its BBB+ issuer credit rating.

On Tuesday Enbridge agreed to buy the East Ohio Gas Co., Questar Gas Co., and Public Service Co. of North Carolina, Inc. from Dominion Energy Inc. for about $14 billion, including $4.6 billion of assumed debt.

“The negative outlook reflects the potential for weaker credit measures related to the acquisition of the three regulated gas distribution companies and a level of uncertainty related to the remaining financing plan for the acquisition. This uncertainty is related to potential receipt of proceeds from discrete noncore asset sales, the issuance of hybrid capital, the use of the at-the-market program, the dividend reinvestment plan, and incremental debt that will be used to fund the purchase price. We forecast pro forma debt to EBITDA will be about 4.9x, which provides limited cushion with respect to our target for the rating,” S&P said in a press release.

The agency warned a downgrade is possible if debt to EBITDA lingers at or above 5x for a prolonged period.

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