Talen Energy prices upsized $1.2 billion 8 5/8% seven-year secured notes at par

Portland, Ore., April 28 – Talen Energy Supply, LLC priced an upsized $1.2 billion issue of seven-year senior secured notes (Ba3/BB/BB+) at par to yield 8 5/8% on Friday, according to market sources.

The issue size increased from $825 million.

The offering priced pursuant to the joint Chapter 11 plan of reorganization of Talen and its affiliated debtors, according to a press release.

The Allentown, Pa.-based independent power producer plans to use the proceeds to fund the refinancing and termination of debt under existing secured financing agreements, to add cash to the balance sheet of the company and its subsidiaries, and for general corporate purposes.

The existing secured financing agreement include a super priority senior secured debtor-in-possession credit facility and existing first-lien debt.

With the upsize in the new notes, the proceeds will also be used to reduce an equity rights offering to $1.4 billion from $1.55 billion. Some of the incremental proceeds will also be applied to transaction expenses.

The company is also getting an exit term B loan in the amount of $580 million, reduced from $825 million due to the upsizing of the senior secured notes.

Proceeds will be held in an escrow account until the effective date of the plan and the emergence of Talen Energy Corp. and Talen Energy Supply from bankruptcy.

There will be a special mandatory redemption at par if the escrow conditions are not met at par, plus interest, to the redemption date.

Citigroup Global Markets Inc. was the left physical bookrunner for the notes. Joint physical bookrunners on the Rule 144A and Regulation S deal were BMO Capital Markets Corp., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, RBC Capital Markets LLC, Credit Suisse Securities (USA) LLC, MUFG Securities Americas Inc., Morgan Stanley & Co. LLC and Barclays.

Paul A. Harris contributed to this story.

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