Great Plains to use committed debt financing, preferred convertible equity for Westar merger

By Lisa Kerner

Charlotte, N.C., May 31 – Great Plains Energy Inc. has secured about $8 billion of committed debt financing from Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC and a $750 million mandatorily preferred convertible equity commitment from the Ontario Municipal Employees Retirement System to fund its acquisition of Westar Energy Inc.

On May 29, Goldman Sachs agreed to provide a 364-day $8,017,000,000 senior unsecured bridge loan facility. It consists of a $7,517,000,000 senior unsecured term loan to fund the cash consideration for the merger and a conditional $500 million senior unsecured term loan for working capital purposes.

The bridge facility bears interest at Libor plus a margin ranging from 112.5 basis points to 225 bps, according to a form 8-K filed with the Securities and Exchange Commission.

The mandatory preferred convertible has a coupon of 7.25% and a 20% premium and is convertible three years after the transaction’s close.

Closing is expected to occur during the spring of 2017.

Management held a conference call on Tuesday to discuss the transaction details.

Great Plains plans to issue permanent financing of about 50% equity and 50% debt prior to closing.

The financing, in addition to the convertible preferred, is expected to include $1.3 billion of equity to the seller, $2.35 billion of equity comprised of Great Plains Energy common and mandatory convertible stock to the public market and $4.4 billion of new Great Plains Energy debt.

Great Plains is committed to retaining a strong investment-grade balance sheet as well as its dividend policy.

The transaction enterprise value of $12.2 billion includes about $8.6 billion of total stock and cash consideration to be received by Westar’s shareholders and the assumption of roughly $3.6 billion of Westar’s debt.

Under the terms of the agreement, which was unanimously approved by the boards of directors for both companies, Westar shareholders will receive $60.00 per share of total consideration for each share of Westar common stock, consisting of $51.00 in cash and $9.00 in Great Plains Energy common stock, subject to a 7.5% collar.

The exchange ratio for the stock consideration ranges between 0.2709 to 0.3148 shares of Great Plains Energy common stock for each Westar share of common stock, for a consideration mix of 85% cash ($7.3 billion) and 15% stock ($1.3 billion), according to a news release.

Great Plains Energy is based in Kansas City, Mo. It is the holding company of Kansas City Power & Light and KCP&L Greater Missouri, two regulated providers of electricity.

Westar Energy is a Topeka, Kan.-based electric utility.

© 2015 Prospect News.
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