Tesoro now expects to buy Western Refining using notes, revolver

By Angela McDaniels

Tacoma, Wash., Dec. 2 – Tesoro Corp. added more lenders to its $2.15 billion 364-day senior bridge facility on Tuesday and said it expects to fund its proposed acquisition of Western Refining, Inc. with senior notes and a $1 billion incremental revolving facility.

Instead of the $1 billion incremental revolver, the terms of the original commitment letter had contemplated up to $750 million of incremental revolving commitments and $750 million of incremental term loans.

As previously reported, the company entered into a financing commitment letter with Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC on Nov. 16.

On Tuesday, the company replaced that letter with an amended and restated commitment letter with Goldman Sachs Bank USA, JPMorgan Chase Bank, NA, Mizuho Bank, Ltd., MUFG, Wells Fargo Bank, NA, Wells Fargo Securities LLC, WF Investment Holdings, LLC, SunTrust Bank, SunTrust Robinson Humphrey, Inc., UBS AG, Stamford Branch and UBS Securities LLC.

The lenders committed to provide the bridge facility and, to the extent proposed amendments to the company’s existing credit facility are not obtained, a $2 billion senior secured backstop credit facility for purposes of refinancing the existing credit facility.

The company expects to use the proceeds of the initial borrowing under the incremental revolver and permanent financing in the form of senior notes in lieu of the bridge facility to fund all or a portion of the cash payment in the merger and to refinance some Western Refining debt.

The initial interest rate is Libor plus a margin ranging from 250 basis points to 325 bps, and the margin steps up by 25 bps every 90 days. The duration fee is 50 bps 90 days after the closing date, 75 bps 180 days after the closing date and 100 bps 270 days after the closing date.

Tesoro will acquire Western Refining at an implied current price of $37.30 per Western Refining share in a stock transaction. The acquisition is expected to close in the first half of 2017.

Tesoro is a San Antonio-based owner, operator, developer and acquirer of crude oil and refined products logistics assets. Western Refining is an El Paso, Texas-based independent refining and marketing company.

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