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Plains Exploration rolls out $2.25B high yield bond deal backing buy from BP

The $2.25 billion M&A bond deal for Plains Exploration & Production emerged from the shadow calendar this morning and pricing is set for later today, according to sources. Tranches include eight-year (non-call three) and 10.5-year (non-call 5.5) notes.

The offering of senior notes comes off-the-shelf via joint bookrunners J.P. Morgan, Barclays, BMO, Citi, and Wells Fargo.

Notes will be redeemed at par if the transaction is terminated or doesn’t close by March 15, 2013. In addition, both issues include standard three-year equity clawbacks for 35% and make-whole call options as well as change-of-control puts at 101% of par with a rating trigger.

Moody’s this morning assigned a B1 rating to the notes, but the rating is on review for possible downgrade. S&P had previously assigned a B issue rating to the unsecured bridge with a recovery rating of 6, which indicates an expectation of negligible recovery in the event of a payment default. At the same time, S&P placed existing corporate and unsecured debt ratings on CreditWatch negative.

Proceeds will help fund the company’s $5.55 billion acquisition of oil and gas interests in the Gulf of Mexico from BP. Financing for the acquisition also includes a $1.25 billion B term loan, a $750 million A term loan, and a $3 billion revolver. The seven-year institutional loan was priced at L+300, with a 1% LIBOR floor, at 99.5, sources said. It is covered by a 101 soft call premium in the first year and amortizes at roughly 7.4% per annum, with the remaining 50% due at maturity.

The properties Plains Exploration is acquiring from BP include the Marlin, Dorado, and King Fields, the Horn Mountain Field, the Holstein Field, the Diana-Hoover Field, and the Ram Powell Field. At the end of July, these properties were producing roughly 59,500 barrels of oil per day. – Staff reports

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