El Paso reworks deal to add institutional letter-of-credit facility, change sizes, cut pricing

By Sara Rosenberg

New York, Nov. 15 - El Paso Corp. made a number of changes to its in-market $3 billion credit facility (B3) on Monday, including adding an institutional synthetic letter-of-credit tranche, reducing the revolver size, increasing the term loan B size and cutting pricing on both the pro rata and the institutional paper.

The three-year revolver is now sized at $1 billion compared to an initial launch size of $1.75 billion and is priced at Libor plus 275 basis points compared to initial price talk of Libor plus 350 basis points, a source said.

The five-year term loan B is now sized at $1.25 billion compared to an initial launch size of $750 million (with the ability to increase to up to $1.25 billion) and is priced at Libor plus 275 basis points compared to initial price talk of Libor plus 325 to 350 basis points.

And, a $750 million institutional synthetic letter-of-credit facility was added to the deal with pricing of Libor plus 275 basis points as well, the source added.

Citigroup and JPMorgan are the lead banks on the term loan and the letter-of-credit facility, with Citigroup the left lead. JPMorgan and Citigroup are the lead banks on the revolver, with JPMorgan the left lead.

The revolver launched via a bank meeting on Oct. 14, and the term loan launched via a bank meeting on Oct. 28.

The institutional portion of the deal was very well received by the bank loan market even before the actual launch with a number of early commitments placed by investors. And, the trend continued during syndication as the deal was obviously met with very strong demand.

And, although El Paso is a new issuer to the institutional market, the company itself is a considered to be a well known credit because there's so much well regarded publicly traded debt in the markets, a source previously explained.

Houston-based energy company El Paso plans to use proceeds from the revolver and term loan to refinance its existing $2.5 billion revolver due June 30, 2005 that bears interest at Libor plus 350 basis points and carries a 75 basis point commitment fee.

This existing revolver was originally sized at $3 billion, but in connection with the sale of a majority of El Paso's interests in GulfTerra Energy Partners LP to Enterprise Products Partners LP in September, the borrowing capacity was reduced.

As of Sept. 30, El Paso had no borrowings outstanding under its existing revolver and had about $1.1 billion of letters of credit issued under the facility.

Over the past several months, El Paso received several waivers on its existing revolver because of necessary financial restatements. The company also received an extension until Nov. 30 to file its second quarter 2004 10-Q. These waivers continue to be effective.

Level 3 catches interest

The book on Level 3 Communications Inc.'s $450 million senior secured term loan "is building," according to a market source, even though price talk is not expected to come out until Tuesday.

Invitations were sent out to lenders on Friday morning to launch the deal and the conference call, which went "fine," took place on Monday, the source said.

Proceeds from the term loan, along with proceeds from a proposed $200 million convertible senior note offering, will be used to help fund the company's previously announced tender offers for up to $450 million of debt securities due 2008, including the 9 1/8% senior notes, the 11% senior notes, the 10½% senior discount notes, and the 10¾% senior euro notes. Each tender offer is scheduled to expire on Nov. 29. But, as of Friday, a little more than $1.1 billion of the 2008 debt securities had already been tendered.

"The company has been meeting with investors. With tender, convert and term loan all happening at the same time there's a lot more going on than with a typical term loan," the source added.

Level 3 Financing Inc., a subsidiary of Level 3 Communications, would be the borrower under the facility.

Merrill Lynch is the sole lead bank on the deal.

Level 3 Communications is a Broomfield, Colo., communications and information services company.

TRW sets launch

TRW Automotive Holdings Corp. has scheduled a bank meeting for Wednesday to launch its proposed $1.9 billion credit facility, according to a market source. JPMorgan is the left lead bank on the deal, with Bank of America and Goldman Sachs also acting as joint bookrunners on the deal.

The facility consists of an $850 million revolver, a $250 million term loan A, and an $800 million term loan B that is talked at Libor plus 175 basis points - in line with the company's recently obtained term loan E, market sources said.

Proceeds from the $1.9 billion deal will be used to refinance $1.7 billion of the existing $2 billion credit facility.

The new $300 million six-year term loan E, which just closed on Nov. 2 and carries an interest rate of Libor plus 175 basis points with the ability to step down to Libor plus 150 basis points based on ratings, will be left in place.

The increase in availability under the proposed deal will result from the expected increase in the amount of the revolver.

TRW, a Livonia, Mich.-based automotive supplier, hopes to close on the new credit facility by year-end.

NRG delays launch

NRG Energy Inc. has decided to delay the launch of its proposed $950 million credit facility to Nov. 29 since it "wanted to revise some numbers to present to the market," according to an informed source.

"They thought it would be done by now but it wasn't so they pushed off the launch," the source added.

Originally, the refinancing deal was scheduled to launch via a bank meeting in New York on Monday afternoon. The decision to delay the meeting was made on Friday.

Credit Suisse First Boston and Goldman Sachs are the lead banks on the deal, with CSFB the left lead.

The facility consists of an $800 million term loan B talked at Libor plus 275 basis points and a $150 million revolver talked at Libor plus 275 basis points.

NRG is a Minneapolis wholesale power generation company.

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