Kerr-McGee gets commitment for $5 billion senior secured credit facility

By Sara Rosenberg

New York, April 14 - Kerr-McGee Corp. has received a commitment for a new $5 billion senior secured credit facility from JPMorgan and Lehman, according to an 8-K filed with the Securities and Exchange Commission Thursday.

The facility consists of a $2 billion senior secured six-year term loan, a $2 billion senior secured two-year term loan and a $1 billion senior secured five-year revolving credit facility.

The company has also received a commitment for a $1 billion unsecured interim facility from the same two banks.

Security for the credit facility is a basically perfected first priority interest in all tangible and intangible U.S. assets and all of the capital stock of direct and indirect subsidiaries.

Proceeds will be used to refinance debt, finance a $4 billion modified "Dutch Auction" self tender offer for shares of the company's common stock and for general corporate purposes.

As a result of the company's self tender offer and financing needs, all three ratings agencies downgraded Kerr-McGee's secured debt ratings - Moody's Investors Service to Ba3, Standard & Poor's to BB+ and Fitch Ratings to BB.

Under the tender offer, the company will buy back up to $4 billion of its common stock at a price not less than $85 per share or more than $92 per share. The tender offer is expected to commence on or about April 18.

"We have been actively engaged in an evaluation of our oil and gas assets to high grade the portfolio to longer-life, less capital intensive properties," said Luke R. Corbett, chairman and chief executive officer, in a company news release. "The current commodity price environment provides an opportunity to divest of shorter-life properties at attractive values. Also, we have already capitalized on these higher prices by expanding our hedging program.

"As a result of these strategic actions, we are returning immediate value to our stockholders through this tender offer. The share repurchase demonstrates our confidence in the company and its future and represents another meaningful step in our commitment to enhance stockholder value.

"With the proceeds from the separation of the chemical business, divestitures of selected oil and gas assets, and cash flow, which has been underpinned by an expanded hedging program for 2005 through 2007, we expect to be able to reduce debt in the range of approximately $3.5 billion to $4.5 billion during the next two years," Corbett added in the release.

Kerr-McGee is an Oklahoma City-based energy and inorganic chemical company.

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