Kinder Morgan

Deal of The Day: Kinder Morgan and “Highly Confident”

KinderMorgan-Dome1.jpgThe buy-out of pipeline giant Kinder Morgan announced today includes a massive amount of debt. Fourteen and a half billion according to the buyer’s press release. That number includes both the refinancing of existing debt and new debt being taken on by the company to pay the purchase price.
So how do the Kinder Morgan management team intend to rack up that much borrowed money? Well, first of all, they don’t intend to borrow anything. In deals like this, the company itself borrows the money to support the acquisition by the management and the collateral will be the assets of the company. It’s like financing your new car, except that instead of you promising to pay back the loan, the car makes the promise. It’s Herbie the Lovebug financing Lindsay Lohan’s purchase of the car.
The meaning of Goldman’s “Highly Confident” letter after the jump.

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