Tesoro upsizes term loan B by $50 million, decreases bond offering by $25 million

By Sara Rosenberg and Paul A. Harris

New York, April 7 - Tesoro Petroleum Corp. upsized its term loan B on Monday after deciding to downsize the bond deal on the day of pricing. The term loan is now $200 million, compared to the initial size of $150 million, according to a syndicate source. Goldman Sachs is the sole lead on the term loan.

This change in size of the term loan is not surprising considering that the facility was reported to have over $1 billion in commitments last week.

"The bonds went down and the term loan went up. The reason why you would do that is that it gives you more ability to pay off debt quicker. The senior secured note has a call feature that is typically longer than a term loan, so if you think that cash flows are going to be stronger you would want to give yourself flexibility to pay off more debt quicker, which a senior secured note does not do," a company source told Prospect News.

The term loan and the bonds are pari passu with each other. The $375 million of bonds - downsized from $400 million - priced at 98.994 to yield 8.25%.

The term loan is due in 2008 and price talk on the term loan is 25 basis points wide of the swap equivalent of the bonds, according to a syndicate source. Call protection is non-callable in the first year, callable at 103 in the second year, callable at 101 in the third year and callable at par thereafter.

Later this month, Tesoro is expected to launch a $650 million asset-based senior secured revolver (Ba3) due 2006 with a $400 million sub-limit for letters of credit and secured by inventory, accounts receivable, cash and certain other assets. Bank One is the bookrunner on the deal and Goldman Sachs is the syndication agent.

The new revolver, term loan and notes will be used to completely refinance the company's existing credit facility. These financing transactions are expected to increase the company's capacity to borrow for working capital needs, allow the company to issue letters of credit instead of making early payments and prepayments to suppliers and apply the funds released to repay debt, and substantially modify the financial covenants under the existing senior secured credit facility.

Tesoro is a San Antonio, Tex. refiner and marketer of petroleum products.

On a snowy April day in New York, the secondary bank loan market was described as "quiet" by a couple of traders, with some saying that most people couldn't stop talking about the ridiculous winter weather in spring and others saying that the stock market's performance may have been a primary focus throughout the day.

However, as usual Charter Communications Inc. and Nextel Communications Inc. were reported to be somewhat active and Calpine Corp. also traded on Monday, according to a trader.

Charter's bank paper traded at 901/4, a trader said, which is basically in line with Friday's levels of 90 bid, 91 offer. The St. Louis cable company performed well last week, moving up from an 88 bid, 89 0ffer, after news emerged that the company received a proposal from Paul Allen for a $300 million loan.

Nextel's term loan B and C were reported to have traded at 98 3/8 on Monday, compared to a level closer to 98 on Friday, a trader told Prospect News. However, on Friday a different trader had the Reston, Va. wireless company's B and C loans quoted at 983/4. The term loan A traded at 96 1/8 on Monday, up slightly from around 95¾ on Friday, the trader said.

Lastly, Calpine's bank debt traded around 96, in line with previous levels, according to a trader. The San Jose, Calif. power company has been trading at 96 since mid-to-late last week.

Over the past week or two there has been a large amount of attention given to power and gas companies as many have either refinanced credit facilities, are working on extending maturities or are planning on paying down bank debt.

Dynegy Holdings Inc., a subsidiary of Dynegy Inc., recently obtained a new $1.66 billion credit facility, consisting of a $1.1 billion secured revolver due Feb. 15, 2005, a $200 million secured term loan A due Feb. 15, 2005 and a $360 million secured term loan B due Dec. 15, 2005. All tranches carry an interest rate of Libor plus 475 basis points. Salomon Smith Barney Inc., Banc of America Securities LLC, and Bank One were co-lead arrangers on the deal.

Proceeds will be used to provide funding for the ongoing collateral needs of existing businesses and general corporate purposes. The new facility replaces the company's existing $900 million revolver due April 28, $400 million revolver due May 27 and a $360 million communications lease due in December 2005.

Dynegy is a Houston producer and deliverer of energy, including natural gas, power, natural gas liquids and coal, through its owned and contractually controlled network of physical assets.

Reliant Resources Inc. recently closed on a new $6.2 billion credit facility, under which the company is permitted to acquire from CenterPoint Energy Inc. its 81% interest in Texas Genco Holdings Inc. The facility consists of a $2.1 billion revolver due March 15, 2007, a $3.8 billion term loan due March 15, 2007 and a $300 million additional line of credit due at the earlier of the Texas Genco purchase or Dec. 15, 2004.

Interest rates on the revolver and the term loan are Libor plus 400 basis points and the new line of credit has an interest rate of Libor plus 550 basis points.

The facility refinances $5.9 billion of existing bank debt, including the $2.9 billion Orion acquisition bridge loan, an $800 million revolver that was converted to a term loan, another $800 million revolver and construction agency agreements totaling $1.4 billion. The new $300 million line of credit will be used to provide the company with additional liquidity in the event of extreme movements in commodity prices, according to a news release.

Reliant Resources is a Houston provider of electricity and energy services.

CMS Energy recently obtained and $850 million credit facility consisting of a $441 million 13-month revolver, which will be used to retire debt and for general corporate purposes, and a $409 million facility with maturity dates of 13 months to 18 months, which amended and restated the previous $300 million and $295.8 million revolvers. Citibank, Merrill Lynch Bank USA and Deutsche Bank Trust Company Americas were the lead banks on the deal.

Consumers Energy, a subsidiary of CMS, recently obtained a $150 million three-year loan led by Salomon Smith Barney Inc., a $250 million revolver due in March 2004 with the option to extend through 2006 that replaced the previous revolver and a $140 million six-year loan arranged by Beal Bank of Dallas.

CMS is a Dearborn, Mich. energy company.

El Paso Corp. is currently in negotiations regarding an amendment to its $3 billion 364-day revolver, which would extend the maturity date, increase the unused commitment fee and margin, add collateral to support the loan, and add and amend financial ratios and covenants. These negotiations, which were announced late March, are still ongoing, a company spokesperson told Prospect News on Monday.

Furthermore, the company is seeking to amend the $1 billion multi-year facility, which would conform to the amended revolver, except for the commitment amount, the lender group and the maturity.

The 364-day revolver matures in May of this year and provides that outstanding amounts are not due until May 2004.

El Paso is a Houston provider of natural gas services.

And, AES Corp. plans to repay $475 million of borrowings under its senior secured credit facility with proceeds from an estimated $1 billion offering of new second priority senior secured notes.

AES is an Arlington, Va. power company.

In follow-up news, Serologicals Corp. closed on a $117.5 million credit facility consisting of an $82.5 million five-year term loan and a $35 million four-year revolver. "The size and structure of the new facility is slightly different than originally anticipated as a result of the company's current cash position and projected cash outlook," a news release said. At launch the deal was structured as a $100 million five-year term loan and a $25 million revolver. UBS Warburg was the lead bank on the deal.

Proceeds from the facility were used to help fund the acquisition of Chemicon International Inc. for $95 million in cash, less Chemicon's outstanding debt as of the closing date.

Serologicals is an Atlanta provider of biological products.

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