Portland General Electric Co. has landed a $400 million five-year revolver, extending loan maturities. PGE decided to obtain the revolver now because it had a $50 million credit facility maturing late last month and another $100 million revolver due in 2007, said Bill Valach, assistant treasurer at the Portland, Ore.-based utility.
The company, which is a subsidiary of Enron Corp., has not drawn down on the revolvers. "With a strong commercial bank market, we wanted to replace our two revolvers with one new upsized revolver with improved terms and conditions and an increased overall size. This provides PGE with enhanced financial flexibility for five years," Valach commented.
The replaced facilities are a $50 million, 364-day revolver and a $100 million three-year revolver, both led by Banc One Capital Markets. The $50 million line was priced at LIBOR plus 110 basis points, and the $100 million revolver carried an interest rate of LIBOR plus 107.5 basis points. The new revolver allows PGE to borrow up to six months at a fixed rate determined at the time of borrowing, or for a longer period at a variable rate also determined at the time of borrowing, he explained.
The interest-rate structure is typical for PGE and is priced off its senior unsecured bond rating, which currently stands at Baa2 from Moody's Investors Service and A- from Fitch Ratings, said Valach. The revolver will also be used for working capital purposes, covering collateral requirements through the issuance of letters of credit, and other general corporate purposes, he said. JPMorgan was chosen as lead arranger based on the utility's longstanding relationship with Banc One, he explained.
The financing is unrelated to Enron's plans to divest PGE, added Valach. Several parties have expressed interest in purchasing PGE, including the city of Portland and the state of Oregon, according to Moody's. The Oregon Public Utility Commission (OPUC) denied a request by Oregon Electric Utility Company, a company backed by Texas Pacific Group, to acquire PGE in a highly leveraged transaction. One factor in Moody's decision to recently upgrade the company's debt rating was the elimination of concerns about a potential ownership change through a highly leveraged transaction.
The OPUC has strongly indicated that it will not approve any leveraged transaction that might significantly jeopardize PGE's credit quality. Accordingly, Moody's believe that an aggressively structured financing plan is unlikely as part of the change in ownership that ultimately is expected as part of Enron's bankruptcy proceedings. Enron intends to move forward with plans to distribute PGE stock to creditors, although it has stated it would consider credible proposals for purchase of the PGE stock.