Tesoro Petroleum ticked up with small trades in the 89-91 context after the company was able to capitalize on the decreasing cost of crude oil. "Crack spreads have improved dramatically over the last month," one trader noted, adding the improvement would have a huge impact on the company's EBITDA.
Despite recent gains, Tesoro still needs to de-lever. While the company has laid out plans to do so, some market players believe Tesoro will have trouble meeting those goals. "I don't think that they will be able to get everything done," said one dealer. Over the summer the company released its plans to reduce debt by $500 million by the end of 2003. The plan includes cutting working capital requirements, reducing costs and divesting assets.Sharon Layman, v.p. and treasurer, could not be reached by press time and a spokeswoman did not return calls seeking comment.
Tesoro recently amended its credit agreement so that all existing EBITDA-based covenants would be pushed out until Sept. 30. Minimum EBITDA and maximum capital expenditure covenants were set in their place. In addition, the spread to LIBOR was upped 1% across the board, so the company's $750 million "B" piece is now LIBOR plus 41/ 2%. In conjunction with the amendment, Tesoro must also complete assets sales to net $175 million before the end of the year. Half of these proceeds will be applied to the company's term loans and the remaining amount will be used to reduce any outstanding amounts on the revolver. So far the company is slated to receive $67 million from the sale of retail stations in northern California. The company must also complete transactions that would net Tesoro $200 million before March 31.