decision to double-down in the United States with another blockbuster acquisition pits newly minted chief executive Greg Ebel’s diversification strategy against the potential for more debt drama.Inc. for US$9.4-billion in cash, plus US$4.6-billion of assumed debt, Mr. Ebel preached the benefits of having multiple revenue streams.
earnings before interest, taxes, depreciation and amortization will be split 50-50 between its U.S. and Canadian operations, and oil has dropped to half of its total profit. In its own ratings update, Moody’s directly addressed the added diversification, with earnings from local gas distribution jumping to 22 per cent of Enbridge’s total, up from 12 per cent currently. While the rating agency welcomes this increase, it is more focused on the growing debt concerns.
To win back investors and restore confidence from rating agencies, Enbridge ultimately sold $5.7-billion worth of assets in 2018, and another $2.1-billion in 2019. While Enbridge’s balance-sheet composition is not triggering a ratings downgrade, equity investors are particularly focused on debt loads now that interest costs on new borrowingsHistorically, Enbridge could override some of these concerns by enticing retail investors with a large dividend yield. That isn’t always enough any more, and before the acquisition was announced, Enbridge’s shares were down 9 per cent this yearAsked about the trade-off between debt and diversification Wednesday, Mr.