Williams Plans to Pay $1.17B Loan, Buy Back WMB Shares from MidAmerican

The Williams Companies announced several significant actions late Monday that will put the company on a much firmer financial footing. Showing that it has made substantial progress with asset sales and through its restructuring plan, the company said it will pay off a high-interest, short-term $1.17 billion loan from a group of investors led by Berkshire Hathaway.

In addition, it will raise $275 million through a private placement of junior subordinated convertible debentures due in 2030 and will use the funds to help retire investments in Williams by a subsidiary of MidAmerican Energy Holdings Co., a member of the Berkshire Hathaway family of companies.

Williams and MidAmerican reached an agreement under which Williams will repurchase for $289 million all of the outstanding 9-7/8% cumulative-convertible preferred shares held by a wholly owned subsidiary of MidAmerican. In March 2002, Williams sold the 1.5 million preferred shares to MidAmerican for $275 million. The company expects to close the repurchase in June.

Williams also announced that it intends to use available cash and refinancing to pay off the $1.17 billion loan prior to maturity. The 364-day high-interest loan, which matures in July, is secured by substantially all of Williams' exploration-and-production interests in the U.S. Rocky Mountains.

"Warren Buffett's Berkshire Hathaway companies served as important strategic partners for Williams in 2002 -- with both a preferred-equity investment and the exploration-and-production loan," said Williams CEO Steve Malcolm. "This group's demonstrated faith in Williams' fundamental strengths and, importantly, our future helped us weather a severe financial crisis.

"We are seizing opportunities that allow Williams to benefit from targeted financings in a manner that is consistent with our overarching goals of strengthening liquidity and reducing debt," he said.

Williams intends to refinance a portion of the exploration-and-production loan with new, subsidiary-level borrowing at market rates. The company is seeking $400 million to $500 million in financing through a four-year, fully funded and prepayable term loan. Williams intends to use the same exploration and production interests to secure the new financing. The remaining amounts due will be repaid from available cash at Williams, principally generated from recently closed asset sales. Williams completed a $1.1 billion sale of Texas Gas Transmission to a subsidiary of Loews Corp. last week (see Daily GPI, May 19). It is scheduled to close the new exploration-and-production loan on or around May 30.

"The fact that, short of a year after the exploration-and-production loan, Williams is in a position to redeem and repay these investments on attractive terms is evidence, in and of itself, of the significant progress we're making toward strengthening our company and narrowing our focus," Malcolm said.

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