Talen Energy outlines anticipated pricing on $250 million term loan

By Sara Rosenberg

New York, Aug. 29 – Talen Energy Corp. revealed in an SC 13E3/A filed with the Securities and Exchange Commission on Monday that its proposed $250 million seven-year covenant-light term loan is expected to be priced at Libor plus 575 basis points with a 1% Libor floor and an original issue discount of 98.

The term loan is also expected to have 101 soft call protection for six months, amortization of 1% per annum and 50 bps MFN for 18 months.

Goldman Sachs Bank USA, RBC Capital Markets, Barclays, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Morgan Stanley Senior Funding Inc. and MUFG are the lead arrangers on the debt.

Proceeds will be used to help fund the acquisition of the company by Riverstone Holdings LLC in a transaction that has a total enterprise value of roughly $5.2 billion.

Under the agreement, all outstanding shares of Talen Energy common stock not currently owned by Riverstone-affiliated entities will be acquired for $14.00 per share in cash. Affiliates of Riverstone currently own about 35% of the outstanding shares of Talen Energy common stock.

The consideration for the common stock in the transaction, of about $1.8 billion, is expected to be funded by the new term loan, a conversion of Riverstone’s existing ownership of Talen Energy common stock into shares of the surviving corporation and Talen Energy’s cash on hand.

The term loan can be increased by $850 million to $1.1 billion to back-stop the company’s tax exempt bond facilities and 6˝% senior notes due 2025 in case of potential repurchase obligations.

Also, upon closing of the buyout, the existing first-lien revolving credit facility at Talen Energy Supply LLC will be reduced to $1.4 billion from $1.85 billion.

Talen Energy Supply already entered into a consent agreement with revolver lenders to waive the change-of-control event of default that otherwise would result from the closing of the transaction.

Closing is expected by the end of the year, subject to approval by a majority of non-Riverstone affiliated stockholders, expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, approval of the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission, as well as certain other customary regulatory approvals and other customary conditions.

Riverstone’s obligation to complete the transaction is also subject to Talen Energy having a minimum amount of cash and revolving credit facility capacity available at closing.

Talen Energy is an Allentown, Pa.-based competitive energy and power generation company.

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