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Goldman Sachs Doubles Money on Kinder Morgan LBO

Goldman Sachs Group Inc., Richard Kinder and the private-equity firms that bought Kinder Morgan Inc. in 2007 have gained at least 126 percent on a pretax basis from their $7.8 billion equity investment, according to CreditSights Inc.

Units of Goldman Sachs, Carlyle Group, American International Group Inc., Riverstone Holdings LLC and Kinder co-founder Richard Kinder agreed to pay $14.4 billion for the operator of North American oil and natural-gas pipelines in August 2006. While the deal was struck at the height of the leveraged takeover boom, it stands out as bondholders haven’t taken losses, said Andy DeVries, a CreditSights analyst in New York.

“This LBO remains one of the most unique of the 2005-07 LBO boom,” DeVries wrote in an April 18 report. In August, he calculated the buyout equity investment had gained 69 percent.

Kinder Morgan’s $835.6 million of 6.5 percent notes due in 2012 rose 0.06 cent to 105.75 cents on the dollar as of 10:04 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Kinder Morgan is the general partner of Kinder Morgan Energy Partners, a publicly traded limited partnership that operates or owns an interest in more than 35,000 miles of pipelines. Chief Executive Officer Kinder and other managers at the firm contributed $2.9 billion of the $7.8 billion equity investment.

Blankfein Cites Deal

Goldman Sachs Chief Executive Officer Lloyd Blankfein cited the transaction in a November 2006 presentation to clients, as an example of companies favoring the firm’s ability to advise on and invest in deals.

“A recent management buyout for Kinder Morgan illustrates this trend,” he said. “We advised Kinder Morgan’s senior management on structuring the transaction, acted as underwriter on the debt financing, and our merchant banking funds invested equity alongside management.”

Emily Thompson, a Kinder Morgan Energy Partners spokeswoman, and Andrea Raphael, a Goldman Sachs spokeswoman, declined to comment.

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