Hedge funds and relative value high-yield investors have jumped into a $355 million financing for NUI Corp. and subsidiary NUI Utilities that will pay between 7-8%. The deal, led by Credit Suisse First Boston, is acting as a bridge to an asset sale of the company and the new financing will make this is a smoother process, said sources. "NUI has several maturities due over the next two years and this will give them a clean run while they are being sold," said a banker.
CSFB was brought in by the natural gas company last month to sell the firm alongside Berenson & Co. This is a major factor in CSFB leading the financing, said a source.Fleet Bank led the previous credit line. Linda Lennox, director of investor relations for NUI, said the financing is expected to close in several weeks. She declined further comment. The deal was targeted specifically at the same investors who played in the Aquila and UtiliCorp deals, the banker noted. Commenting on the proliferation of non-traditional loan investors, he said there were significantly more hedge funds interested in this transaction. Last month NUI Utilities secured $50 million in financing led by an affiliate of alternative asset management company Fortress Investment Group. This revolver was set to mature in February. Officials from Fortress could not provide comment by press time.
The new unsecured 364-facilities consist of a $255 million term loan at the holding company level that carries pricing of LIBOR plus 6% with a 2% LIBOR floor. At the operating company level, there is $100 million of bank debt, split into a $50 million term loan and a $50 million revolver. Pricing on these facilities are at LIBOR plus 5% with a 2% LIBOR floor. The undrawn on the revolver is 62.5 basis points. Additionally, there are two extension fees on the debt, so the company can extend the facilities at its sole discretion, the banker added. "After the 364-day passes, the fee is 50 basis points and after 18 months there are 50 basis points on the back end." The longest maturity is two years.
Investors must take both pro rata and term loan and these must also be traded as a strip. "This is to align the interests of the upstairs with the downstairs," the banker said. "This will prevent investors at the holding company level [from undermining] the operating level lenders." One investor said he usually does not like "hold co." debt because the investor is structurally subordinate to the "op. co." The bank facilities due in February consist of a $25.7 million revolver at the operating company level and a $124 million revolver at the holding company level. There are also some medium-term notes maturing.