Forest Oil shelves syndication of $850 million bridge loan

By Sara Rosenberg and Paul A. Harris

New York, June 16 – Forest Oil Corp. pulled syndication of its $850 million senior bridge loan due to “M&A dynamics,” a market source told Prospect News.

Although no reason for the withdrawal of the bridge loan was immediately available, a belief appears to have taken hold that a deal that would have affected the merger of Sabine Oil & Gas LLC with Forest Oil is at best undergoing revision, a high-yield bond trader said, noting that Forest Oil shares had given up more than 13% before the Monday close.

The bridge loan was being marketed with pricing of Libor plus 675 basis points, increasing by 50 bps every 90 days after funding up to a specified cap, with a 1% Libor floor.

Commitment fees were 75 bps for commitments of $75 million and 50 bps for commitments of less than $75 million. The fee was based on commitment amount but earned on the allocation amount and is payable upon successful consummation of the merger of Forest Oil and Sabine Oil & Gas.

Barclays, Wells Fargo Securities LLC, Bank of America Merrill Lynch, Citigroup Global Markets Inc., Capital One, Natixis and UBS AG are the bookrunners on the deal.

Proceeds were earmarked for the repayment of Forest Oil’s existing debt in connection with the merger.

The combined entity, to be named Sabine Oil & Gas Corp., will be based in Houston.

Under the merger agreement, each share of Forest Oil common stock will be converted into 0.1 of a share of Sabine Oil & Gas common stock. The amount is designed to replicate a 10 to 1 reverse stock split. Concurrently with the merger, Sabine’s parent entity will contribute all of its equity interest in Sabine to Sabine Oil & Gas, in exchange for which it will receive about 33 million shares of Sabine Oil & Gas common stock.

Upon completion of the combination transaction, Sabine unit holders will own 73.5% of the new combined entity and Forest shareholders will own 26.5%.

Closing is expected in the third or fourth quarter, subject to approval by the Forest shareholders, regulatory approvals and other customary conditions.

Forest Oil is a Denver-based oil and gas company. Sabine is a Houston-based energy company.

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