Liquidity lifts private placement activity; El Paso Pipeline, CCL see market as better option, not a fallback

By Paul A. Harris

St. Louis, Sept. 24 - The private market has been pretty hot during the month of September to date, a market source said, adding that it has seen approximately $5 billion of deals, representing approximately 10% of the year-to-date total.

"There is a lot of liquidity in the market," the source added.

Practicality, not fright

Meantime Bruce L. Connery, vice president, investor-media relations for El Paso Pipeline Partners, LP, told Prospect News on Wednesday that the $175 million private placement which the company disclosed last week had been in the works well before the post-Labor Day volatility began roiling the capital markets.

Connery said that a true private made the most sense with respect to the acquisition, and added that the company did not revert to the private placement market simply because of the volatility in the more public Rule 144A bazaar.

A market source said that the deal was done in three tranches of fixed-rate senior notes with maturities of three-, four- and five years. Each one came at a 500 basis points spread to Treasuries, the source added.

The offering also had a four-year floater.

Connery said that the arrangement was done between El Paso Pipeline Partners and the insurance companies that took down the debt. He declined to identify any of the investors, but said that no placement agent was involved in the deal.

The proceeds will be used to help fund the partnership's planned acquisition of an additional 30% interest in Colorado Interstate Gas Co. and an additional 15% interest in Southern Natural Gas Co. from El Paso Corp. The acquisition with cost $736 million, and it will also be funded with $65 million from an existing revolving credit facility, a $10 million notes to El Paso Corp. and about 27.76 million common units of the partnership.

Settlement of both the debt and the acquisition is scheduled for Sept. 30.

Houston-based El Paso Pipeline is a Delaware limited partnership formed by El Paso Corp. to own and operate natural gas transportation pipelines and storage assets.

CCL sees 'easier' market

Also choosing the private placement arena on its own merits rather than as a fallback was CCL Industries Inc.

It saw cost and efficiencies as the draws for its $130 million offering of senior unsecured notes.

"In my experience, it has always been easier to [enter the] private market versus the public market," said Steve Lancaster, executive vice president and acting chief financial officer, in an interview with Prospect News. He added that going the private way also means that no rating agencies are involved.

Lancaster also noted that private placements are a simpler route given that investors are in it for the long term.

The company plans to issue the new notes in two parts. The first is $52 million of 5.86% notes due 2013 and the second is $78 million of 6.62% notes due 2018. The company expects to close on the deal on Friday.

Proceeds from the transaction will be used to repay bank debt and for general corporate purposes, according to a press release. Citigroup Inc. acted as placement agent.

CCL Industries is a Toronto-based developer of labeling solutions and specialty packaging for the consumer products and healthcare industries.

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