EP Energy buyout financing expected to include $500 million term B

By Sara Rosenberg

New York, March 29 - EP Energy Corp.'s purchase by Apollo Global Management LLC, Riverstone Holdings LLC, Access Industries Inc. and other investors is anticipated to be funded in part with a $500 million term loan B, according to a market source.

A final determination on the obtainment and size of a term loan B tranche has not yet firmed up and, the source said, a decision won't be made until launch, which could occur as early as next week.

If used, funds from the term loan B would replace some of the $3.5 billion bridge loan commitment that the company has received for its buyout.

It is also thought that a $500 million secured bond offering and $2.5 billion of unsecured bonds will be used for the bridge loan replacement, the source remarked, adding that the financing structure is still fluid.

Under the terms of the bridge loan, which has already been marketed to investors, the company can use up to $1.5 billion of secured debt consisting of term loan borrowings and/or bonds for the replacement of the bridge debt.

Other funds for the roughly $7.15 billion purchase of EP Energy from El Paso Corp. will come from a $2 billion reserve-based revolving credit facility, of which $1 billion will be drawn at close, and $3 billion of equity.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., BMO Capital Markets Corp., RBC Capital Markets, UBS Securities LLC and Nomura are the lead banks on the deal, with Citi the left lead on the bridge loan and JPMorgan the left lead on the revolver.

Closing is expected in the second quarter, subject to the completion of the acquisition of El Paso by Kinder Morgan Inc.

EP Energy is a Houston-based oil and natural gas exploration and production company.

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