Enbridge to transfer assets to Enbridge Income Fund

Enbridge Inc. has entered into an agreement with Enbridge Income Fund to transfer a package of natural gas and diluent pipeline interests to the Fund for total consideration of US$ 1.76 billion. The transfer is subject to receipt of customary regulatory approvals and is expected to close in November 2014.

Enbridge will receive on closing approximately US$ 421 million in cash, US$ 878 million in the form of a long term note payable by the Fund and bearing interest of 5.5% per annum, and US$ 461 million in the form of preferred units of Enbridge Commercial Trust, a subsidiary of the Fund. The note is expected to be repaid by the Fund on an expedited basis through the issuance of lower cost public debt, as with the prior transfers completed in 2011 and 2012. The Fund will issue US$ 421 million of trust units to Enbridge Income Fund Holdings to fund the cash component of the consideration.

ENF has entered into a bought deal agreement with a group of underwriters for US$ 336 million of subscription receipts exchangeable into ENF common shares on closing of the transaction. Enbridge has subscribed for US$ 84 million of ENF common shares to maintain its interest in ENF at 19.9%. Enbridge's overall economic interest in the Fund will decrease slightly from 67.3% to 66.4% as a result of the transfer.

J. Richard Bird, Executive Vice President, Chief Financial Officer and Corporate Development, commented: "This latest drop down transaction is consistent with our strategy of utilising our sponsored vehicles as a significant source of low cost funding for our record growth capital programme. The drop down will provide US$ 1.2 billion of net funding to Enbridge, of which over US$ 300 million is in the form of equity. At the same time we retain a significant indirect interest in these assets and will also benefit from the corresponding increase in our incentive distributions from the Fund. So the drop down puts us in a strong position on our overall equity funding plan and is also increasingly accretive over the term of our strategic plan compared with issuing Enbridge common equity. It is a larger transaction than our previous drop downs, reflecting the larger asset base and capitalisation of the Fund and ENF, and in turn will contribute further to the Fund's scale and asset quality, positioning it as an even more effective funding alternative going forward."

Adapted from press release by Rosalie Starling

Read the article online at: https://www.worldpipelines.com/business-news/23092014/enbridge-to-transfer-assets-to-enbridge-income-fund-844/