Boston Generating's downsized $350 million second lien jumped to 102 1/2-3/4 after it broke in the secondary market at 101-102. Its $1.13 billion first-lien term loan broke at 100 1/2-3/4. Credit Suisse and Goldman Sachs lead the deal, which refinances existing debt and pays a $1 billion dividend to its investor group (CIN, 12/11).
The second lien was originally $400 million, but $50 million was shifted to the term loan, which has a lower coupon. The credit line includes a $250 million synthetic letter of credit and a $70 million revolving credit facility. Pricing was slashed by 75 basis points on the first and second liens. The first lien priced at LIBOR plus 2 1/4%, while the second lien ended up at LIBOR plus 4 1/4%.
One buysider said many investors are familiar with Boston Generating because of its time spent in restructuring, adding that a lot of hedge funds are familiar with the company's equity and are comfortable with the amount of debt it is carrying. According to Moody's Investors Service, $1.1 billion of incremental debt will be added to the consolidated balance sheet at parent EBG Holdings. This will result in substantial negative net worth at both Boston Gen and at EBG.
The investor said the spread tightening on the first and second lien indicates a consistent theme in the credit markets. "Things are getting tighter across the board. People are more comfortable with the power sector. It is doing well. It is leading to tighter spreads," he said.
Boston Gen is a wholly owned subsidiary of EBG Holdings. After it completes its debt restructuring, venture capital firm K-Road will own 9.9% of the power plant. Officials at EBG and K-Road did not return calls.