Lenders are eagerly anticipating the financing backing the $3.65 billion acquisition of Texas Genco Holdings by The Blackstone Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co. and Texas Pacific Group. "You cannot ignore a $2 billion deal," said one banker. An institutional lender agreed. "Absolutely. There's still more demand than there is supply in the marketplace," he noted.
About 20 commercial banks were invited to participate in a senior managing agent meeting last Tuesday and the bank meeting for institutional investors is expected next week. Goldman Sachs and Morgan Stanley are joint lead arrangers on the credit and Deutsche Bank and Citigroup are bookrunners.
The structure is split into a $325 million revolver, $200 million letter of credit facility, $300 million special letter of credit facility, $900 million "B" loan and $475 million delayed-draw "B" loan, a banker said. The special letter of credit facility is synthetic and will be sold to institutions, he added.
The sponsors will put about $1.08 billion of equity into the deal. Under a Power Purchase Agreement (PPA) with Goldman, Texas Genco will sell forward a substantial quantity of its available baseload capacity through 2008. The $300 million special L/C facility will be used for letters of credit to support commodity hedging obligations regarding the PPA, a Securities and Exchange Commission filing says.
Price talk has not been disclosed because the banks are waiting for ratings. There is a 50 basis point undrawn fee on the revolver and L/C facility and 1 1/4% undrawn fee on the delayed-draw term loan.
The investor group has formed an affiliate, GC Power Acquisition, that will purchase the company. CenterPoint Energy currently has an 81% interest in Texas Genco and will get proceeds of about $2.9 billion from the sale. A CenterPoint/Texas Genco investor relations official referred questions about the financing to GC Power. Spokesmen for Blackstone, Hellman and TPG did not return calls. A KKR spokesman declined comment.