Kinder Morgan To Raise $1.25B From Bond Sale To Repay Debt Early
Kinder Morgan (KMI
) is seeking to raise a total of $1.25 billion in senior notes at lower coupon rates in a move to repay almost $1 billion in debt early.
The US oil and gas pipeline operator is planning to issue $750 million in 2% notes due 2031 and $500 million in 3.25% bonds maturing 2050.
“We intend to use a portion of the net proceeds we receive from this offering to repay in full our $600 million aggregate principal amount of 5.300% notes due September 2020 and $349 million aggregate principal amount of 6.500% notes due September 2020,” the company said in a SEC filing.
The move comes after Kinder Morgan at its second-quarter earnings release last week, announced that it recorded a $1-billion impairment charge because of the steep fall in natural gas prices induced by the coronavirus crisis, which in turn impacted the value of some of its assets.
The company added that it is looking to refinance upcoming debt maturities to take advantage of a very low interest rate environment allowing it to issue debt at attractive coupon rates.
Shares in Kinder Morgan have been hit hard, declining 33% so far this year, with the majority of analysts cautious on the stock’s outlook. The Moderate Buy
analyst consensus shows 4 Buy ratings versus 5 Hold ratings and 1 Sell rating.
Meanwhile, Goldman Sachs analyst Michael Lapides
earlier this month downgraded the stock to Sell from Hold and lowered the price target to $15 from $16.
“We downgrade Kinder Morgan, largely a relative valuation and performance call here, as we expect shares to lag large-cap midstream peers in 2H2020 with more upside elsewhere in our coverage,” Lapides wrote in a note to investors.
In light of the stock’s plunge this year, the $17.60 average price target indicates 24% upside potential from current levels. (See Kinder Morgan stock analysis on TipRanks
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