La Grange term loan add-on breaks for trading at plus par levels in hushed pre-holiday market

By Sara Rosenberg

New York, May 28 - La Grange Acquisition LP's $400 million term loan add-on broke for trading Friday morning in an otherwise silent pre-holiday weekend market, with the add-on immediately moving higher from its initial offer price of par to reach levels of par ½ bid, par 7/8 offered, according to a trader.

The add-on, which is being led by Bank of America, is priced at Libor plus 300 basis points, in line with pricing on the rest of the company's already existing $325 million term loan that was obtained in January and matures on Jan. 18, 2008.

Proceeds from this add-on will be used to help fund the Energy Transfer Partners LP's acquisition of all of the midstream natural gas assets of TXU Fuel Co. for about $500 million. The transaction is subject to approval under the Hart-Scott-Rodino Act and closing by June 1. The all-cash transaction is also being financed through some equity financing.

La Grange, a Texas limited partnership that is engaged in midstream natural gas operations, is a subsidiary of Energy Transfer Partners, a Tulsa, Okla., partnership that owns and operates a diversified portfolio of energy assets.

Besides the entrance of this new paper into the secondary bank loan market, it was a quiet day with little to no trading activity taking place in the Street.

"There were no customers around to call" being that many people took the day off to extend the long holiday weekend, a trader said.

And since there wasn't much activity, most bank debt levels remained unchanged. For example, St. Louis cable company Charter Communications Inc. saw its term loan A continue to be quoted at 97¾ bid, 98 offered and its term loan B continue to be quoted at 98¾ bid, 99¼ offered, the trader added.

Dynegy closes

Dynegy Inc. closed on its new $1.3 billion credit facility (B2/BB-/B+) consisting of a $700 million revolver due May 2007 with an interest rate of Libor plus 400 basis points and a $600 million term loan B due May 2010 with an interest rate of Libor plus 400 basis points and call protection of 101 in year one, according to a company news release.

Originally, the deal was launched with both the revolver and the term loan priced at Libor plus 300 basis points, but pricing was increased during syndication. Furthermore, the call protection feature contained in the term loan B was added during syndication as well.

Banc of America Securities LLC, Citigroup Global Markets Inc., Credit Suisse First Boston, J.P. Morgan Securities Inc. and Lehman Brothers Inc. were all lead arrangers on the deal. Lehman and JPMorgan were joint bookrunners on the term loan B with Lehman listed on the left. Citigroup and Bank of America were joint bookrunners on the revolver with Citigroup listed on the left.

As was previously reported, the lead arrangers committed $625 million toward the revolver before the deal even launched on May 10. Morgan Stanley Senior Funding Inc. and Merrill Lynch Capital Corp. joined the lead arrangers of the transaction and committed $75 million to complete the revolving credit facility target amount of $700 million.

"The substantial commitments by our five lead arrangers, as well as the addition of Morgan Stanley and Merrill Lynch to the Dynegy bank team, reflect the significant progress we have made to restore the confidence of the financial community through our self-restructuring program," said Bruce A. Williamson, chairman, president and chief executive officer, in the release. "Through their commitments, these seven institutions are demonstrating their belief in our company and, importantly, their desire to be a part of Dynegy's future.

"By accomplishing this important financial milestone now, we reduce future refinancing risk and extend our maturity runway to help the company capitalize on continued improvements in the U.S. economy and a return to a stronger power price environment. This will further position Dynegy for growth opportunities in the sector as they materialize."

The new facility replaces the company's previous $1.1 billion revolver, which was scheduled to mature in February 2005. About $190 million of the term loan will be used to repay existing higher-cost debt, and the remaining drawn funds will be used for general corporate purposes. The revolver was undrawn at closing and is available for letters of credit and general corporate purposes.

Dynegy is a Houston energy company.

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