Billionaire Kinder's Pipeline Giant Drops Under Junk Threat

(Bloomberg) -- Billionaire Rich Kinder owned about 11 percent of Kinder Morgan Inc. valued at more than $10 billion in June when he stepped down as chief executive of the company he co-founded.

Now his stake is worth about $5 billion less, and the company that has his name on the door has become the worst- performing pipeline stock in the S&P 500. 

Kinder, who remains as board chairman, thought he was giving a boost to his oil and gas shipping empire last year when he consolidated his collection of companies to form the largest pipeline operator in North America. Instead, Kinder Morgan has lost half its value this year as growth-hungry investors sour on what they see as a slow-moving, debt-laden behemoth that will have difficulty expanding during an industry downturn that’s dragging down most energy companies. 

With assets stretching from Canada’s Pacific Coast to the U.S.-Mexico border, Kinder Morgan owns enough pipelines to circle the Earth three times. Its $40 billion-plus debt burden exceeds the economic output of entire nations, including Bolivia and Bahrain.

Kinder Morgan shares extended losses to a record low for a second day Wednesday after Moody’s Investors Service lowered its outlook to negative and said Kinder Morgan’s debt is flirting with junk status. The prospect intensified concerns that the company won’t be able to deliver on profit and dividend growth amid the worst energy market collapse in a generation.

Payout Disappointment

Kinder Morgan shocked investors in late October when, for the first time in at least 13 years, management backed away from a promise to lift dividends. The company said its plan for a 10 percent annual increase for the next four years might be too ambitious.

Then Kinder Morgan this week agreed to more than double its stake in a junk-rated pipeline operator that Moody’s said will pile another $1.5 billion in debt on Kinder Morgan’s $40.7 billion in obligations.   “Investor anxiety” is taking its toll on Kinder Morgan, Shneur Gershuni, an analyst at UBS, said in a note to clients on Wednesday. The Moody’s announcement fueled concerns that the company “sits perilously close” to getting labeled as junk.


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