Enbridge Inc. has announced:
the completion today of the previously announced stock-for-stock merger transaction (the Transaction) to acquire all of the outstanding common stock of Spectra Energy Corp (NYSE:SE) (Spectra Energy).
This led Standard & Poor’s to announce:
- •On Feb. 27, 2017, Enbridge Inc. announced the completion of its merger with Spectra Energy Corp. in a share-exchange transaction.
- •With the merger’s completion, Spectra subsidiary Westcoast Energy Inc. will become a wholly owned subsidiary of Enbridge Inc.
- •We view Westcoast as a core subsidiary of Enbridge, so we are raising our ratings on Westcoast, including our long-term corporate credit rating to ‘BBB+’ from ‘BBB’.
- •We removed the ratings from CreditWatch, where they were placed with positive implications Sept. 6, 2016.
- •The stable outlook on Westcoast reflects the outlook on ultimate parent Enbridge.
S&P Global Ratings today said it raised its ratings on Westcoast Energy Inc., including its long-term corporate credit and senior unsecured debt ratings on the company to ‘BBB+’ from ‘BBB’. S&P Global Ratings removed the ratings from CreditWatch, where they were placed with positive implications Sept. 6, 2016. The outlook is stable.
Enbridge Inc. has announced its merger with Spectra Energy Corp., under which Spectra and all its subsidiaries, including Westcoast, will merge with Enbridge at the closing of this share-exchange transaction.
The stable outlook on Westcoast reflects the outlook on parent Enbridge,
because we view Westcoast to be a core subsidiary under our criteria, so have
linked the ratings and outlooks on the two.
The stable outlook on Enbridge reflects our view that the transaction with Spectra will not result in material asset dispositions that do not repay debt, or changes in proposed financing for the combined capital program that increase the proportion of debt. In addition, we expect that the planned capital program will occur on time and budget, and that the financing plans will maintain adjusted funds from operations (AFFO)-to-debt at the low end of the significant financial risk profile category at about 14%.
The new S&P rating for the Westcoast preferreds, W.PR.H, W.PR.J, W.PR.K and W.PR.M, is now P-2(low), up a notch (but an important notch!) from P-3(high).
DBRS commented on the merger:
DBRS continues to believe that the merger does not have any impact on the credit quality of Spectra and its DBRS-rated subsidiaries as no changes are currently contemplated to Spectra, its subsidiaries and counterparties, as a result of the Transaction. As a result, the stand-alone credit profiles of Spectra and its DBRS-rated subsidiaries remain unchanged.
With respect to Enbridge, DBRS confirmed all ratings:
DBRS Limited (DBRS) has today confirmed the following ratings of Enbridge Inc. (ENB) and removed them from Under Review with Developing Implications where they were placed on September 6, 2016. The trends are Stable:
— ENB, Issuer Rating of BBB (high)
— ENB, Medium-Term Notes & Unsecured Debentures rated BBB (high)
— ENB, Cumulative Redeemable Preferred Shares rated Pfd-3 (high)
— ENB, Commercial Paper rated R-2 (high)
With respect to financial risk profile, DBRS expects ENB to meet its key target metrics of 15% funds from operations (FFO) to debt and five times debt-to-EBITDA, likely in late 2018 or early 2019. DBRS notes the combined entity’s substantial medium-term capex program and consequently expects near-term pressure on ENB’s credit metrics to continue. DBRS expects the recovery in key credit metrics (on both consolidated and non-consolidated bases) at the combined entity to be faster than previously expected from ENB on a stand-alone basis. This expectation is consistent with a number of key DBRS assumptions, including the migration of the combined entity’s common dividend payout ratio toward the low end of the 50% to 60% range over the medium term, the achievement of expected run-rate synergies and estimated tax savings, and that there is no increase in structural subordination at the ENB level from currently contemplated levels.
The Stable trends incorporate DBRS’s expectation that any incremental investments in new projects will be consistent with maintaining a strong overall business risk profile and medium-term improvement in key credit metrics. Changes to any of these and other key assumptions would cause DBRS to revisit the current ratings and/or trends.