Plains Exploration to launch $1.25 billion term loan B on Thursday

By Sara Rosenberg

New York, Sept. 12 - Plains Exploration & Production Co. will hold a bank meeting in New York at 1 p.m. ET on Thursday to launch its proposed $1.25 billion seven-year term loan B, according to a market source.

J.P. Morgan Securities LLC, Barclays, Bank of America Merrill Lynch, BMO Capital Markets Corp., Citigroup Global Markets Inc., RBC Capital Markets LLC, Scotia Capital (USA) Inc., TD Securities (USA) LLC and Wells Fargo Securities LLC are the lead banks on the debt.

Amortization on the loan is 7.143% annually with 50% balance due at maturity, the source said.

The company previously said that it will also be getting a $3 billion five-year revolver and a $750 million five-year term loan A as part of its $5 billion senior secured credit facility.

Pricing on the credit facility is expected to be in the range of Libor plus 250 basis points to 325 bps depending on the term loan versus the revolver, company officials said on a conference call a few days ago.

Proceeds, along with $2 billion of senior notes, will be used to fund the $560 million acquisition of a 50% working interest in the Holstein Field from Shell Offshore Inc., the $5.55 billion purchase of oil and natural gas interests in the Gulf of Mexico from BP Exploration & Production Inc., to refinance some existing debt and for general corporate purposes.

The notes are backed by a commitment for a $2 billion senior unsecured bridge loan that is priced at Libor plus 750 bps.

Closing on the Holstein acquisition is expected by year-end, but the effective date is Oct. 1. The transaction is subject to preferential rights, title and environmental due diligence and other customary conditions.

The acquisition of the BP assets is expected to close on Nov. 30 but have an effective date of Oct. 1. Closing is subject to the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The company disclosed that it has a leverage reduction plan that includes hedging up to 90% of oil production through 2015 to achieve $1 billion plus of yearly free cash flow and divesting $1.5 billion to $2 billion of low-margin non-operated natural gas assets. The $2.5 billion to $3 billion of free cash flow and asset sales proceeds raised through these initiatives will be used to reduce debt below $7 billion by year-end 2013.

Plains Exploration is a Houston-based oil and gas company primarily engaged in the activities of acquiring, developing, exploring and producing oil and gas in California, Texas, Louisiana and the Gulf of Mexico.

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