DBRS Confirms Spectra Energy Capital, LLC and Rated Subsidiaries, Removes UR-Dev. Status

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:

-- Spectra, Issuer Rating of BBB
-- Spectra, Unsecured Debentures rated BBB
-- Spectra, Commercial Paper rated R-2 (middle)
-- Westcoast, Issuer Rating of A (low)
-- Westcoast, Unsecured Debentures rated A (low)
-- Westcoast, Commercial Paper rated R-1 (low)
-- Westcoast, First Preferred Shares - cumulative, redeemable rated Pfd-2 (low)
-- Union Gas, Issuer Rating of “A”
-- Union Gas, Unsecured Debentures/Medium-Term Note Debentures rated “A”
-- Union Gas, Commercial Paper rated R-1 (low)
-- Union Gas, Cumulative Redeemable Preferred Shares rated Pfd-2
-- M&NP, Issuer Rating of “A”
-- M&NP, 4.34% Senior Secured Notes due 2019 rated “A”
-- M&NP, 6.90% Senior Secured Notes due 2019 rated “A”
-- Express, Issuer Rating of A (low)
-- Express, Senior Secured Notes due 2020 rated A (low)
-- Express, Subordinated Secured Notes due 2019, rated BBB

The September 6, 2016, rating actions followed the announcement that Enbridge Inc. and Spectra have entered into a definitive merger agreement that will combine the two companies in a stock-for-stock merger transaction (the Transaction). The Transaction values Spectra common stock at approximately $37 billion (USD 28 billion), based on the closing price of Enbridge Inc.’s common shares on September 2, 2016. The Transaction is expected to close in the first quarter of 2017, and upon closing, Spectra will become an indirect wholly owned subsidiary of Enbridge Inc. and will cease to be a publicly held corporation. (Please refer to DBRS press release, “DBRS Places Spectra Energy Capital, LLC and Rated Subsidiaries Under Review with Developing Implications.” dated September 6, 2016.)

DBRS had the opportunity to meet with the senior management of both the companies prior to the Transaction being announced to discuss the details of the merger. DBRS was also provided with considerable documentation relating to the Transaction. After a review of the information provided and details of the September 6, 2016, announcement, followed by the conference call hosted by both the companies, 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.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Ratings Companies in the Pipeline and Diversified Energy Industry (December 2015), Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (October 2015), DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (April 2016), DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (January 2016) and DBRS Criteria: Rating Holding Companies and Their Subsidiaries (January 2016), which can be found on our website under methodologies.

The ratings of Spectra Energy Capital, LLC were not initiated at the request of the rated entity.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.