El Paso obtains $3 billion two-year revolver at Libor plus 350 bps

By Peter Heap

New York, April 16 - El Paso Corp. said it obtained a $3 billion secured revolving credit facility due June 30, 2005 at Libor plus 350 basis points.

The new revolver refinances El Paso's existing $3 billion 364-day revolving credit facility. It includes a $1.5 billion letter of credit sub-limit and has a 75 basis points commitment fee.

The revolver has four borrowers: El Paso Corp., ANR Pipeline Co., El Paso Natural Gas Co. and Tennessee Gas Pipeline Co.

Borrowings are guaranteed by El Paso and subsidiaries, including American Natural Resources Co., El Paso CNG Co., LLC, El Paso Tennessee Pipeline Co. and the legal entities that directly own the pledged equity interest. Pipeline company borrowers are only liable for the amounts each company borrows. El Paso Natural Gas Co. and Tennessee Gas Pipeline Co. will continue as guarantors for approximately 120 days after closing and until certain conditions are completed.

Commitments will be reduced and prepayments required if El Paso sells the series A common units and series C units of El Paso Energy Partners, LP that are pledged as collateral, sells or disposes of pledged equity interests.

Covenants include a requirement that El Paso keep the ratio of consolidated debt and guaranties of El Paso and its consolidated subsidiaries to capitalization of El Paso and its consolidated subsidiaries at 75% or less. The pipeline borrowers are required to keep their individual ratio of consolidated debt and guaranties to EBITDA at 5 to 1 or less.

Pledged collateral will is 100% of El Paso's outstanding equity interests in Tennessee Gas Pipeline Co.; 100% of its outstanding equity interests in Tennessee Storage Co., which owns 50% of the outstanding equity interests in Bear Creek Storage Co., and 100% of the outstanding equity interests in Southern Gas Storage Co., which owns 50% of the outstanding equity interest in Bear Creek Storage; 100% of the outstanding equity interests in ANR Pipeline Co. and ANR Storage Co.; 100% of the outstanding equity interests in El Paso Natural Gas Co.; 100% of the outstanding equity interests in El Paso Mojave Pipeline Co., which owns 50% of the outstanding equity interests in Mojave Pipeline Co. and 100% of the outstanding equity interests in EPNG Mojave Inc., which owns 50% of the outstanding equity interests in Mojave Pipeline; 100% of the outstanding equity interests in CIG Gas Supply Co., which owns the sole general partner interest in Wyoming Interstate Co. Ltd. and Wyoming Gas Supply Inc., which owns the sole limited partner interest in Wyoming Interstate; 100% of the outstanding equity interests in Noric Holdings III, LLC, which is the owner of 100% of the outstanding equity interests in Colorado Interstate Gas Co.; 100% of the outstanding equity interests in Noric Holdings I, LLC and Noric Holdings IV, LLC, which own directly 100% of the outstanding equity interests in the entities that hold the natural gas and oil assets and production payments within the Mustang structure; and 11,674,245 series A common units and 10,937,500 series C units issued by El Paso Energy Partners, LP.

El Paso said its existing $1 billion revolving facility, which matures in August 2003, and approximately $1 billion of other bank facilities (including leases, letters of credit and other facilities) will remain in place with no change in maturity. However, the key financial covenants of these facilities have been amended to match the new $3 billion facility and they will share in the collateral being provided to the new facility.

El Paso also said it has restructured its approximately $750 million remaining outstanding Clydesdale preferred interests as a $753 million amortizing secured term loan due Feb. 7, 2005.

This loan has four borrowers: Noric Holdings, LLC, Noric Holdings I, LLC, Noric Holdings III, LLC and Noric Holdings IV, LLC. It is guaranteed by El Paso.

Collateral is the assets pledged in the existing Clydesdale transaction which consist of a production payment from El Paso, various oil and natural gas properties, and El Paso's equity ownership interest in Colorado Interstate Gas Co.

Under the amortization provisions of the new loan, $100 million is due quarterly through November 2004 with the remainder due at maturity.

Interest is Libor plus 396 basis points.

"We are pleased with the support provided by our bank group that allowed for the completion of this important step in our operational and financial plan well ahead of schedule," said Ronald L. Kuehn, Jr., chairman and chief executive officer of El Paso, in a news release. "These facilities provide significant value to all of our stakeholders as they further improve the company's liquidity position while simplifying and strengthening our balance sheet. They are designed to provide the company with the flexibility to aggressively reduce our leverage with our cash flow from operations and the proceeds from our asset sales program over the remainder of 2003 and 2004."

El Paso said it will not look to find at least $250 million of additional pre-tax cost savings and business efficiencies beyond the $150 million previously announced by the end of 2004, work to recover as promptly as practicable cash collateral currently committed to its trading, petroleum, refining, and other businesses; and reducing obligations senior to common stock by at least $2.5 billion by the end of 2003.

Among the planned financing actions, El Paso expects to repay the $1.2-billion two-year term loan issued in February 2003 through the issuance of longer-term debt in the capital markets in the second or third quarter to eliminate the amortization requirements of that financing in 2004 and 2005.

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