Deutsche Bank and Goldman Sachs this morning offered a reworked structure of their loan deal for Murray Energy as the issuer scaled back its planned investment in Foresight Energy’s general partnership, sources said. Changes to the loan include a short-dated carve-out, as well as sweetened pricing.
Murray this morning announced changes to the transaction, reducing its ownership percentage in Foresight such that the deal now allows Foresight to keep its debt stack in place, sources said. Murray will now pay roughly $1.37 billion for a 34% stake in Foresight’s general partnership, and a 50% interest, as before, in the limited partnership. Murray originally planned to purchase an 80% interest in the GP.
Arrangers are now floating revised loan terms on the back of that announcement. They have carved out a $300 million, two-year B-1 term loan, which is talked at L+600, with a 1% LIBOR floor, and is offered at 99. The balance is now a $1.7 billion, B-2 term loan. The loan, previously $1.825 billion, has been scaled back to five years, from six years, and pricing has been increased to L+650, with a 1% LIBOR floor, and offered at 97.
The longer-dated term loan includes 102 and 101 hard call premiums in years one and two, respectively. The short-dated tranche includes a 101 soft call premium for 12 months.
Commitments will be due later this week, sources added.
By contrast, the longer-dated loan was launched at $1.675 billion at talk of L+575, with a 1% floor and a 98 offer price, although the issuer tweaked the loan’s size as its $1.55 billion bond deal was launched to investors, sources said.
The issuer a week ago launched the bonds as $1.55 billion, two-part second-lien bond deal while revising covenants on both the loan and bonds deals. The issuer was seeking five- and eight-year tranches, each with the now-common short call schedules, with two and three years of protection, respectively, and both with first call premiums of par plus 75% coupon. Guidance was 10.25-10.5% and 10.75-11%, respectively, sources noted. The bond deal was expected to price late last week, but remained up in the air amid whispers of widening talk, sources added.
The bonds are now expected to total $1.3 billion, sources said.
Among the covenant changes foisted last week, the drop down trigger on cash consideration was tightened 75% at greater than 2.5x (from 3x), stepping to 50% at less than 2.5x. LP units can now be received as cash below 2x, instead of 2.75x. The excess-cash-flow sweep was bolstered to 75% above 2.5x, rather than 3.25x, and 50% above 2x, rather than 2.5x. The permitted acquisitions basket was trimmed to $50 million, from $100 million, and the asset-sale basket as reduced to $100 million annually, from $150 million.
The last week’s changes also firmed other elements of documentation that hadn’t been outlined previously. For example, the leverage covenant will be set at 3x through Dec. 30, 2015, stepping down over time. As well the incremental basket has been set at $150 million plus additional amounts subject to first-lien net leverage of 1.5 x. – Chris Donnelly