By Paul A. Harris
Portland, Ore., Jan. 25 – Talos Production Inc., a wholly owned subsidiary of Talos Energy Inc., made an upsized $1.25 billion two-part placement of senior secured second-priority notes (B3/BB-/B+) on Thursday, according to market sources.
The deal, upsized from $1 billion, featured a $625 million tranche of five-year notes that priced at par to yield 9%. The yield printed 25 basis points below the tight end of the 9¼% to 9½% talk.
It also featured a $625 million tranche of seven-year notes that priced at par to yield 9 3/8%. The yield printed on top of yield talk that had the seven-year notes pricing 3/8% behind the five-year notes.
J.P. Morgan Securities LLC was the lead.
Prior to the upsize and release of price talk there was $6.5 billion of demand across both tranches, according to a bond trader, who added that demand was slightly skewed toward the five-year notes.
The Houston-based independent energy company plans to use the proceeds to fund a portion of the cash consideration for its pending acquisition of QuarterNorth Energy, Inc., as well as to pay off the Talos Production 12% second-priority senior secured notes due 2026, with any remaining proceeds to be used for general corporate purposes, which may include repayment of a portion of the senior reserves-based revolver.
An aggregate of $340 million of the new notes will be subject to a special mandatory redemption if the QuarterNorth merger is not consummated on or before May 31, 2024.
| Issuer: | Talos Production Inc.
|
| Amount: | $1.25 billion, upsized from $1 billion
|
| Issue: | Senior secured notes
|
| Lead: | J.P. Morgan Securities LLC
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| Trade date: | Jan. 25
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| Settlement date: | Feb. 7
|
| Ratings: | Moody’s: B3
|
| S&P: BB-
|
| Fitch: B+
|
| Distribution: | Rule 144A and Regulation S
|
|
|
| Five-year notes
|
| Amount: | $625 million
|
| Maturity: | Feb. 1, 2029
|
| Coupon: | 9%
|
| Price: | Par
|
| Yield: | 9%
|
| Spread: | 496 bps
|
| First call: | Feb. 1, 2026 at 104.5
|
| Price talk: | 9¼% to 9½%
|
|
|
| Seven-year notes
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| Amount: | $625 million
|
| Maturity: | Feb. 1, 2031
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| Coupon: | 9 3/8%
|
| Price: | Par
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| Yield: | 9 3/8%
|
| Spread: | 528 bps
|
| First call: | Feb. 1, 2027 at 104.688
|
| Price talk: | 3/8% behind five-year notes
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