PPL Energy Supply to get $1.85 billion revolver for Talen transaction

By Toni Weeks

San Luis Obispo, Calif., Nov. 5 – PPL Energy Supply, LLC intends to enter into a credit agreement providing for a five-year $1.85 billion revolving loan in connection with the creation of Talen Energy Corp., according to an 8-K filing with the Securities and Exchange Commission. Talen is being formed by combining PPL Energy Supply and RJS Power Holdings LLC.

The revolver will include capacity available for letters of credit and short-term borrowings. The agreement will allow Energy Supply to increase the amount available under the revolver or under additional term loan facilities by up to $750 million, subject to additional increases upon achievement of a certain consolidated first-lien net leverage ratio covenant. The agreement also allows the borrower to refinance the loans with debt incurred outside the credit agreement and to extend the revolver’s, and, if applicable, the term loans’ maturity date.

Borrowings are expected to bear interest at Libor plus 250 basis points, subject to two step-downs of 25 basis points upon achievement of a consolidated first-lien net leverage ratio of less than 4.00 to 1.00 and 3.00 to 1.00, respectively. There is also a commitment fee of 37.5 bps as well as customary letter-of-credit fees.

Outstanding loans may be repaid at any time without premium or penalty, other than, in the case of the prepayment of a Libor loan, a reimbursement of the lenders’ redeployment costs.

Obligations under the revolver will be guaranteed by Energy Supply and any of its wholly owned domestic subsidiaries.

The credit agreement will require the borrower to maintain a senior secured leverage ratio as of the last day of any fiscal quarter of less than or equal to 4.50 to 1.00.

Citibank, NA is the administrative agent. Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc., BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, Bank of Tokyo-Mitsubishi UFJ Ltd. and RBC Capital Markets are the joint lead arrangers and joint bookrunners.

Concurrently with the closing of the new facility, Energy Supply will terminate its existing $3.2 billion of credit facilities, and RJS Power will terminate its existing $150 million revolving credit facility. Both companies will repay any borrowings under their respective facilities.

Once the transaction closes, Allentown, Pa.-based Talen will be an independent, publicly traded energy and power generation company.

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