NRG Seeks Spread Cut Fueled By Gas Prices

Credit Suisse First Boston is leading an approximately $950 million refinancing for NRG Energy that will dramatically cut the spread on its term loan only one year after the debt was put in place for the company's bankruptcy exit. NRG has improved its cash flow more than expected since its emergence last December. "Gas prices have been very high and they benefit from a larger margin on their plants," noted Arleen Spangler, an analyst with Standard & Poor's.

NRG is looking to cut the rate from LIBOR plus 4% to the LIBOR plus 2-2 1/2% range for its term loan, said buysiders. Lenders are miffed that the spread is being cut but are gratified that they will at least get paid at a premium, some for the second time this year. The loan was put in place as part of NRG's $1.45 billion senior debt exit financing, The term loan was originally $950 million but in January, NRG prepaid $503.5 million through issuing 8% second priority notes. Interest expense at the time included $15 million of pre-payment penalties due to a 103 call premium. Buysiders said the planned refinancing is scheduled after Dec. 23 when the prepayment penalty drops from 103 to 102.

The term loan dipped from 103 to 102 1/2-103 1/3 in the secondary market last week after the company announced it is working to refinance its facility. An NRG spokeswoman declined further comment. CSFB and Lehman Brothers lead the credit, which also comprises a $250 million revolver and $250 million letter of credit facility. Bankers at CSFB and Lehman did not return calls.