Krotz Springs launches $295 million first-lien loans; $425 million ABL expected to launch soon

By Sara Rosenberg

New York, May 19 - Krotz Springs held a bank meeting on Monday to launch its proposed $295 million of first-lien bank debt, and plans are to hold a bank meeting sometime in the next two weeks to launch its $425 million ABL revolver, according to sources.

The first-lien debt consists of a $245 million term loan and a $50 million letter-of-credit facility to support substantial hedging.

Prior to launch, price talk on the term loan and letter-of-credit facility was heard to be Libor plus 550 basis points with a 3.25% Libor floor and an original issue discount of 98, sources said.

The first-lien debt is non-callable for one year, then at 101, sources continued.

Credit Suisse is arranging the term loan and letter-of-credit facility, and Wachovia provided the revolver commitment.

Proceeds from the $720 million credit facility will be used to help fund Alon USA Energy, Inc.'s acquisition of the Krotz refinery from Valero Energy Corp. for $333 million in cash plus an amount for working capital, including inventories, to be determined at closing. The equity contribution for the deal totals $105 million.

The credit facility is non-recourse to Alon.

There is a 100% cash flow sweep feature under the credit facility.

The revolver, which has a $75 million accordion feature, will be used to support ongoing working capital needs.

Alon said previously that it expects that the transaction will generate strong free cash flow that should enable substantial delevering of the debt within three years.

Total leverage at Krotz (opco debt) will be 0.9 times.

The transaction is expected to close during the latter portion of the second quarter or early in the third quarter, following satisfaction of customary conditions, including regulatory approvals.

Krotz Springs is an 85,000 barrel-per-day refinery located in Louisiana. Alon is a Dallas-based refiner and marketer of petroleum products.

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