El Paso Corp. on Tuesday closed $3 billion of credit facilities, which CEO Doug Foshee said indicate the “significant progress” the company has made to improve its financial position. The new facilities replace an existing facility set to expire in June 2005.
The new financing package includes a three-year, $1 billion revolving credit facility, a five-year, $1.25-billion term loan facility and a $750-million funded letter of credit facility that can also be used for loans as letter-of-credit requirements decrease. Combined, the facilities replace a revolving credit and letter of credit facility with an original capacity of $3 billion (current capacity of $2.5 billion), and they are secured by the same collateral securing the previous facility: interests in El Paso Natural Gas Co., Tennessee Gas Pipeline Co., ANR Pipeline Co., Colorado Interstate Gas Co., Wyoming Interstate Co. Ltd., ANR Storage Co., and Southern Gas Storage Co.
“These new facilities…provide us with longer-term liquidity, greater flexibility and a significantly lower cost than our previous bank facility,” said Foshee. “We appreciate the support shown by our lenders.”
At closing, El Paso borrowed $1.25 billion through the term loan facility and used a portion of these proceeds to repay its Lakeside Technology Center obligations of $229 million. This loan will be repaid in amounts of $5 million per quarter with the remaining unpaid balance due at maturity in November 2009.
The $750 million funded letter of credit facility provides the company with the flexibility to issue letters of credit or borrow any unutilized capacity under this facility as loans with a maturity in November 2009. This facility was used to support approximately $750 million of existing letters of credit issued under the previous revolving credit facility. The new credit facilities have restrictive covenants that are covered under one credit agreement.
“The market’s strong response to this transaction allowed us to achieve significantly lower borrowing costs and upfront fees versus our original expectations,” said Foshee. “In addition, we will benefit from $2 billion of our new facilities having a five-year maturity. The new borrowings, when combined with our existing strong cash position, will allow us to prudently use these funds over time to address our near-term debt maturities and extend our maturity profile.”
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