The $1.8 billion, 364-day revolving credit launched last week forWilliams Companies may face challenges from persistent questions about the propriety of its trading operations, according to Power Finance & Risk, an LMW sister publication. Bankers said the company story is a strong one, but the focus on trading could be a problem. "If they continue to be in the headlines every day, whether it is fair or not, it is going to make it tough," says one official, who attended the Houston bank meeting. The Federal Regulatory Energy Commission last week said the company had failed to cooperate with information requests related to its investigation into power trading in the western U.S. The move followed a published report that Williams tried to manipulate gas prices in California two years ago. Kelly Swan, a company spokesman, denied both charges.
The facility replaces a $2.2 billion facility maturing July 23 and forms a key part of the company's liquidity cushion. The current liquidity position is made up of $700 million in cash, a $700 million term loan and the $2.2 billion commercial paper backstop, says Swan. The renewed facility is also earmarked as a commercial paper backstop.
There are a number of positives to the deal, including the fact that the Citibank-led facility is being downsized from the current $2.2 billion, according to bankers considering taking part. They say there is also a feeling that Williams has a good grip on its trading operations, unlike some utilities that have headed into the merchant trading sphere. "Williams has always traded and generally people feel that Williams' finance department understands the trading operations and the cash flow," says one veteran lender.
On the flipside, Williams is looking for a term out provision and that may be a tough sell to some bank credit committees. Term outs allow a company to extend the maturity of the revolver by drawing down the credit line without going back to the banks. The precise conditions of the term out could not be determined, but in order to use that provision the covenants outline asset sales and an equity issuance that need to executed, says one financier, declining to give details. "They have to perform to get the flexibility," he reflects. Fees on the facility could not be determined.