El Paso Corp. said Tuesday it will cut debt by at least $10 billion by mid-2005, a third higher than the $7.5 billion target it set just two weeks ago, according to a proxy statement sent to shareholders.

As it prepares for a stormy shareholder meeting in June, the Houston-based company urged shareholders in its latest proxy letter to reject an alternate slate of directors nominated by two of its most vocal and unhappy investors, Selim Zilkha and Oscar Wyatt. Together, Zilkha and Wyatt own about 2% of El Paso’s stock, and they have launched a battle for control of the Houston-based company.

El Paso had sent out a detailed letter to shareholders in mid-May that included most of the information in Tuesday’s letter, but reiterated that it plans to sell more assets and cut more capital spending to reduce debt by another $2.5 billion, up from $7.5 billion announced two weeks ago (see Daily GPI, May 14). El Paso said in its shareholder letter that it plans to sell at least $3.4 billion in assets this year. It now carries about $25 billion in debt, and the new figures would put its debt at around $5 billion if it were to hit its targets by 2005.

“We are targeting a minimum of $400 million of annual pre-tax cost savings and business efficiencies by the end of 2004, which includes the pre-tax target of at least $150 million that we will achieve in 2003,” said interim CEO Ronald L. Kuehn Jr. “Our recent action to eliminate four of our 10 senior executive positions underscores our commitment to this process.”

Kuehn said the company is in “discussions with a number of outstanding candidates who are currently senior executives (including chief executive officers and chief operating officers) of large energy companies. We expect to complete this process promptly once the Zilkha/Wyatt proxy contest is behind us.”

Also on Tuesday, El Paso Corp. said it has repaid a $1.2 billion two-year secured interim term loan that it had obtained in March after subsidiary El Paso Production Holding Co. obtained its own 10-year unsecured loan at a lower interest rate so that it could make an intracompany debt payment.

CFO Dwight Scott said the transaction would reduce El Paso’s annual interest expense by $24 million and would eliminate debt maturity obligations of $300 million in June 2004, $300 million in September 2004 and $600 million in March 2005.

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