Iroquois Gas Transmission System has eschewed the bank market and instead is offering $170 million of senior notes via a private placement in order to finance the ongoing construction of its Eastchester Extension and Athens Expansion projects. "We could have used bank facilities, but we wanted longer-term financing," explained Paul Bailey, cfo of the Shelton, Conn., pipeline company. Proceeds from the notes, led by J.P. Morgan and co-managed by TD Securities and Bank of Montreal, will also pay off a term loan, which then will be converted into a revolver, he added. The bank loan is led by J.P. Morgan and was put in place in 2000, he noted.
Explaining the need to term out the debt maturities, Bailey said, "Iroquois has $200 million of bonds due in 2010, and the nine-year amortizing bank facility would have expired in 2009." The proposed notes, meanwhile, expire in 2027.
Another reason for opting for bonds is that when the idea was initiated, there was favorable conditions for pipeline bonds, Bailey added. "Kinder Morgan Management, Kern River Gas Transmission Company and Alliance Pipeline indicated the market is positive," he stated. Iroquois' notes were priced after Loan Market Week went to press, but Bailey predicted the range would fall within expectations. This is a private, not public, placement, he said, responding to suggestions that volatility in the equity and bond markets could affect syndication. The expansion is important, as it will extend a pipeline from Long Island to New York City, said Bailey. The 375-mile pipeline extends from the Canadian border to Long Island, N.Y.