Teco Energy gets new $200 million credit facility

By Sara Rosenberg

New York, July 6 - Teco Energy closed on a new $200 million three-year credit facility. JP Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. were co-lead arrangers on the deal.

The syndicate is comprised of eight banks.

The interest rate on the facility can range from Libor plus 100 to 250 basis points, depending on ratings, according to an 8-K filed with the Securities and Exchange Commission on Tuesday. Furthermore, the commitment fee can range from 20 to 50 basis points depending on ratings (see table 1).

Security is the stock of Teco Transport Corp. This security will be released upon achieving an investment-grade credit rating at both Moody's Investor Services and Standard & Poor's.

There are only two covenants contained in the credit agreement, EBITDA-to-interest and debt-to-EBITDA (see table 2).

The facility replaces the company's existing $350 million credit facility that was set to expire in November. In addition, the $200 million contingent credit facility with Merrill Lynch and JP Morgan was cancelled upon the effectiveness of the new facility, a company news release said.

The facility includes a $100 million letter-of-credit sublimit. The $32 million of letters of credit currently outstanding were transferred from the previous facility.

"This completes another component of our announced plans to maintain and improve our financial position," said Gordon Gillette, senior vice president-finance and chief financial officer, in the release. "With capital expenditures at appropriate levels and essentially internally funded, and with the free cash that we expect to generate for each of the next several years, this facility is sized to provide a backup for meeting our day-to-day liquidity needs for the next three years.

"This multi-year facility demonstrates that the banks are comfortable with our strategy to focus on our core Florida utilities and profitable unregulated businesses, and our plans to continue to improve our financial position."

Teco is a Tampa, Fla., diversified energy-related holding company.

Table 1: Applicable Margin

Ratings Libor Spread Commitment Fee

BBB/Baa2 or higher 1.00% 0.20%

BBB-/Baa3 1.50% 0.25%

BB+/Ba1 1.75% 0.375%

BB/Ba2 2.00% 0.50%

BB-/Ba3 or lower 2.50% 0.50%

Table 2: Leverage and Interest Coverage Ratios

Period Consolidated Consolidated

Leverage Ratio Interest Coverage Ratio

From the effective date through Dec. 30, 2005 5.25-to-1 2.25-to-1

From Dec. 31, 2005 through Dec. 30, 2006 5.00-to-1 2.60-to-1

From and after Dec. 31, 2006 4.90-to-1 2.60-to-1

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