Ruby Pipeline LLC, a natural gas pipeline joint venture (JV) operated by Kinder Morgan Inc., recently filed to reorganize under chapter 11 of the U.S. Bankruptcy Code.

Kinder Morgan and fellow JV owner, Pembina Pipeline Corp., filed for bankruptcy in response to Ruby Pipeline’s upcoming debt repayment obligation, according to a company release.

“The bankruptcy filing comes as no real surprise,” analysts with Tudor, Pickering, Holt & Co. (TPH) wrote in an April 4 research note.

The TPH analysts noted Ruby’s $475 million of debt maturing in April versus the $98 million of cash and equivalents on the company’s balance sheet per its most recent financial filing “with both KMI and PPL CN unwilling to inject additional equity to cover the shortfall,” the analysts added.

“Furthermore, the announcement is in-line with our modeled assumption that Ruby would default and thus all cash flows to both partners would cease in Q2’22 and beyond,” the analysts wrote.

The Ruby natural gas pipeline JV extends from Wyoming to Oregon. Co-owners Kinder Morgan and Pembina will continue to work with Ruby’s bondholders in an effort to work out a mutually satisfactory resolution concerning the company’s debt repayment obligation, according to the company release.

“The market similarly viewed the outcome as neutral with both KMI and PPL CN trading in-line on Friday (April 1),” the TPH analysts wrote in the firm’s note. “We will continue to monitor the situation for further updates, but expect that limited incremental natural gas egress demand from WY to the West Coast could make a materially positive update unlikely.”

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