EFTA01378313.pdf

INTERNAL USE ONLY DO NOT DISTRIBUTE IN PART OR IN WHOLE Corporate Credit > U.S. Investment Grade Kinder Morgan Inc. Updated: November 2, 2015 Trade Idea: Buy Kinder Morgan Inc 10-year bonds Investment Rationale: We are maintaining our outperform relative value recommendation on KMI at this time. This is based mainly on the fact that the bonds are still quoted slightly behind ETP (also outperform) and well behind WES and CPGX, which are all comparably rated. Only SXL is quoted slightly wider at this time, which is a much smaller, less liquid name. In our view, we think the main reason that MLP names have underperformed relative to the energy sector is due more to bond market technicals than fundamentally driven. We believe that MLP spreads should tighten significantly if, and when, the bond market recovers and the appetite for higher yielding bonds increases. At this point, we are cautiously optimistic that market conditions will improve by the end of the year. We will continue to monitor the market closely. - KMI reported EBITDA of $5.2 billion for the nine-months ended 9/30/15, down 2% from the same period last year. Interest expense increased 15%, which caused EBITDA/interest coverage to drop to 3.43x from 4.03x last year. Leverage on a TD/EBITDA was also weaker at 6.05x as of 9/30/15 from 5.71x at YE 2014. Distribution coverage was 1.00x for 3Q 2015, which is the same as the same period last year. - The company remains bullish due to the need for pipeline infrastructure to move and store natural gas, crude oil and NGLs from the growing shale plays and oil sands, which should be the mains driver of growth. In addition, the trend toward LNG for export and natural gas export to Mexico should provide some long-term demand upside, which is already leading to some firm capacity pipeline contracts. Recommendation(s): Trade Ratings Issue Spread Cash View Horizon Ticker CPN Maturity COY Size Yield Price ISIN S&P Moody's Enuy Target Loss Outperform 6 mos. KMI 4 30 6/1/2025 BBB Baal USD 1.58 562 353 313 393 90 35 U549456 OAF Deutsche Meet & WesTh Management 13 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075482 CONFIDENTIAL SDNY_GM_00221666 EFTA01378313