El Paso Corp. Secures $2.25 Billion in Bank Lines

El Paso Corp. has chosen to establish separate bank lines via distinct lead arrangers, reflecting a strategic decision to meet its changing financial needs and arrange with experts in the relevant products. The company's B1-rated facilities will be issued through separate agreements with Deutsche Bank, JPMorgan, and Citigroup. This move comes as El Paso Corp. seeks to replace its existing $3 billion credit facilities with a combination of new lines totaling $2.25 billion. In a recent transaction, El Paso Performance-Linked Trust was established to issue trust securities and purchase a $500 million certificate of deposit (CD) from Deutsche Bank, which will collateralize the $500 million revolver.

Key Takeaways:

• El Paso Corp. is issuing a $500 million revolver via Deutsche Bank, a $1.25 billion three-year revolver priced at Libor plus 175 bps, and a $500 million five-year letter of credit priced at Libor plus 200 bps through JPMorgan and Citigroup.
• The decision to issue two separate facilities was based on El Paso's current financial needs and the expertise of the desired arrangers, as stated by company spokesman Bill Baerg.
• The company plans to replace its existing $3 billion in credit facilities with the new lines totaling $2.25 billion, reflecting a shift in business demands and the size of its credit requirements.
• El Paso Performance-Linked Trust is a Delaware statutory trust created on June 21, 2006, with Deutsche Bank Trust Company Delaware serving as a trustee.
• The $1.25 billion revolver led by JPMorgan and Citigroup will be closed by July 28, according to a filing, and was pitched to investors on July 10.
• An institutional investor believes the bank debt should be rated higher than B1, given the collateral coverage, but notes the complexity of El Paso's capital structure holds back the ratings.

Statistics:

• $2.25 billion: Total value of the new bank lines being issued by El Paso Corp.
• $500 million: Value of the revolver issued through Deutsche Bank.
• $1.25 billion: Value of the three-year revolver priced at Libor plus 175 bps led by JPMorgan and Citigroup.
• $500 million: Value of the five-year letter of credit priced at Libor plus 200 bps via leads JPMorgan and Citigroup.
• $3 billion: Existing credit facilities that El Paso Corp. plans to replace with the new lines.
• $500 million: Value of the certificate of deposit (CD) issued by Deutsche Bank, collateralized by El Paso Performance-Linked Trust.

Sources:

• Bank Loan Report
• SourceMedia, Inc.