Talos launches upsized $1.25 billion two-part notes offering inside of talk; pricing Thursday

By Paul A. Harris

Portland, Ore., Jan. 25 – Talos Production Inc., a wholly owned subsidiary of Talos Energy Inc., launched its upsized $1.25 billion two-part offering of senior secured second priority notes (B3/BB-/B+) on Thursday, according to market sources.

The Rule 144A and Regulation S deal, upsized from $1 billion, features a $625 million tranche of five-year notes with two years of call protection, launched at 9%, 25 basis points below the tight end of the 9¼% to 9½% talk.

The deal also features a tranche of seven-year notes with three years of call protection, launched at 9 3/8%, on top of talk that had the seven-year notes coming 3/8% behind the five-year notes.

Final terms are expected on Thursday.

Prior to the upsize and release of price talk there was $6.5 billion of demand across both tranches, according to a bond trader, who added that demand was slightly skewed toward the five-year notes.

J.P. Morgan Securities LLC is leading the notes sale.

The Houston-based independent energy company plans to use the proceeds to fund a portion of the cash consideration for its pending acquisition of QuarterNorth Energy, Inc., as well as to pay off the Talos Production 12% second priority senior secured notes due 2026, with any remaining proceeds to be used for general corporate purposes, which may include repayment of a portion of the senior reserves-based revolver.

An aggregate of $340 million of the new notes will be subject to a special mandatory redemption if the QuarterNorth merger is not consummated on or before May 31, 2024.

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