Edison Loan Jumps With Clean Sweep Debt Reduction

The tranche "A" bank debt for Edison Mission Midwest Holdings (EMMH) rolled up to the 99 range with more than $100 million changing hands after Edison Mission Energy (EME) revealed that it had received a commitment letter for a three-year, $700 million secured bridge loan to meet the bank debt maturity coming due on Dec. 11.

  • 23 Nov 2003
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The tranche "A" bank debt for Edison Mission Midwest Holdings (EMMH) rolled up to the 99 range with more than $100 million changing hands after Edison Mission Energy (EME) revealed that it had received a commitment letter for a three-year, $700 million secured bridge loan to meet the bank debt maturity coming due on Dec. 11. Citigroup , Credit Suisse First Boston , J.P. Morgan , and Lehman Brothers are the banks providing the bridge. EME is offering a spread of LIBOR plus 5 1 / 2 %, with a 2% LIBOR floor, on the $700 million secured loan, which launched last week. Bankers said the spread, while attractive to high-yield investors, is probably on the mark given the parlous state of its subsidiary's finances.

The tranche "A" debt had been trading in the 96 context prior to the refinancing news. The company's Collins lease facility also ran up from the 86 context to the 94 range. There was an auction of nearly $20 million of Collins lease debt, which went off in the 93 1 / 2 -94 range last Tuesday. The debt is expected to be refinanced before its maturity next December as a part of the company's overhaul efforts.

In a conference call on Monday, Ted Craver , executive v.p., cfo and treasurer of EME's parent company Edison International , explained that the bridge loan was one of the prongs of a four-part plan to address debt maturities. "Creditors at every level stand to benefit" if the current plan is consummated, he said. EMMH has $781 million in bank debt maturing on Dec. 11 and will use $550 million of the bridge loan and cash on hand to pay that off. This loan was recently reduced from $911 million after a Standard & Poor's downgrade triggered a requirement to take cash on deposit in the company's cash flow recapture account to prepay its credit. The company directed $130 million to the $911 million tranche "A" loan and $116 million to the $808 million "B" loan.

The remainder of the bridge loan, along with asset sales, cash on hand and normal project distributions, will be used to meet additional debt payments, including $188 million in coal and capital expenditure facilities due in January and July and a $212 million revolver that only has about $65 million of letters of credit drawn against it. The company plans to meet these debt maturities by the summer of next year.

The second step in the debt overhaul is to refinance the debt at its Midwest Generation entity. This includes the $692 million of "B" term debt left and $774 million of Collins lease debt set to come due next December. Craver said the company was looking to be able to complete the refinancing well in front of its maturities considering the foreseen reduction in leverage at EMMH from the other debt reduction initiatives.

Next, the company is looking to sell some or all of its international assets and has chosen Lehman and CSFB as financial advisors. Craver said most of the assets are in developing countries and have long term power purchase agreements so the company is looking for attractive prices. Finally, those proceeds will be used to retire the bridge loan, but will then be available to meet other long-term obligations. Craver said the company intends to accomplish most of the goals within the next year.

 

  • 23 Nov 2003

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