PrefBlog

Well, that didn’t take long! On September 6 I reported ENB Acquiring Spectra: Ratings Effect Unclear, with DBRS placing ENB and W on Review-Developing.

Today, DBRS announced that it:

maintained the following ratings of Enbridge Inc. (ENB) Under Review with Developing Implications, where they were placed on September 6, 2016:

— 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)
…
DBRS had the opportunity to meet with the senior management teams of both companies prior to the Transaction being announced to discuss details of the merger. DBRS was also provided with considerable documentation relating to the Transaction. After a review of the information provided and the September 6, 2016 announcement, followed by the conference call hosted by both companies, DBRS has determined that closing of the Transaction, as announced, will not impact the credit quality of ENB’s DBRS-rated subsidiaries (EIF, EPI, EGD and EEP) and has therefore confirmed these ratings.

POTENTIAL IMPACT ON ENB
DBRS believes that the Transaction, as proposed, before considering the potential sale of non-core assets, will be neutral for ENB’s overall business risk profile.
…
With respect to the financial risk profile, ENB stated that it expects to fund future growth in a manner that is consistent with maintaining a strong investment-grade credit profile with key target metrics of 15% funds from operations (FFO) to debt and five times debt-to-EBITDA, which DBRS views as falling well within the financial parameters of the existing rating and likely to be achieved in late 2018 or early 2019.
…
Consequently, DBRS expects to confirm all of ENB’s ratings with Stable trends in the event that the Transaction closes as contemplated. This expectation is based on a number of key DBRS assumptions, including no new material debt at the ENB level (aside from potential migration of Spectra Capital’s long-term debt to ENB over time) as a result of the Transaction, migration of the combined entity’s common dividend payout ratio towards the low end of the 50% to 60% range over the medium term, achievement of the contemplated improvement in credit metrics over the current planning period and no increase in structural subordination at the ENB level from currently contemplated levels. Changes to any of these, and other, key assumptions would cause DBRS to revisit the current ratings.

In addition:

DBRS Limited (DBRS) has today confirmed the ratings of Spectra Energy Capital, LLC (Spectra or the Company), Westcoast Energy Inc. (Westcoast), Union Gas Limited (Union Gas), Maritimes & Northeast Pipeline Limited Partnership (M&NP) and Express Pipeline Limited Partnership & Express Pipeline LLC (Express) with Stable trends. This rating action removes the ratings from Under Review with Developing Implications under which they were placed on September 6, 2016, as follows:
…
— Westcoast, First Preferred Shares – cumulative, redeemable rated Pfd-2 (low)
…
DBRS has determined that the Transaction will not impact the credit quality of Spectra and its DBRS-rated subsidiaries (Westcoast, Union Gas, M&NP and Express). DBRS notes that there are no changes contemplated to Spectra, its subsidiaries and counterparties, as a result of the Transaction. As announced, the financing for the Transaction is expected to be at the Enbridge Inc. level with no incremental borrowing at the Spectra entities. As a result, DBRS views the overall impact of the Transaction, as announced, on the stand-alone credit profiles of Spectra and its DBRS-rated subsidiaries as neutral and has therefore confirmed the ratings.

Affected issues are:

ENB.PF.A, ENB.PF.C, ENB.PF.E, ENB.PF.G, ENB.PR.A, ENB.PR.B, ENB.PR.D, ENB.PR.F, ENB.PR.H, ENB.PR.J, ENB.PR.N, ENB.PR.P, ENB.PR.T, ENB.PR.Y

W.PR.H, W.PR.J, W.PR.K

This entry was posted on Thursday, September 8th, 2016 at 10:57 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.