Citigroup and Goldman Sachs have landed lead roles on a $500 million loan for Energy Transfer Co., a holding company that owns the general partner of the Master Limited Partnership (MLP), Energy Transfer Partners. MLPs are publicly traded partnerships that are designed to encourage the development of natural resources. Energy Transfer Partners owns and operates various energy assets including natural gas operations and retail marketing of propane.
The deal was set to be a seven-year, $700 million term loan, but John McReynolds, president of the company, said it has been downsized to $500 million. Pricing is LIBOR plus 2%. The company, which was unlevered, decided to take advantage of the strength of the debt markets and historically low interest rates and take a dividend. Pro forma for this year, the company has a little over $100 million of debt. "It is just sitting there with this great cash flow with no debt, it is the cleanest company possible," McReynolds said of why they decided to do the dividend now.
Citigroup and Goldman Sachs were chosen because "we liked the nameplate, the terms and the market sales force," he said. A number of individuals wanted to lead the deal, but the holding company liked these two banks and said Energy Transfer Partners had worked with them in the past.