InterGen quickly secured $430 million for a 10-year mini-perm loan using a new structuring strategy whereby it rotated lead lenders on three deals. The Magnolia Energy Project deal, led by ABN AMRO andCredit Lyonnais, closed last month, and is the third deal in a group of three energy loans whereby InterGen rotated different members of its bank group into the lead roles to satisfy lenders and speed up syndication on the deals. "In this manner, we were able to keep the bank group relatively secure by rewarding them with underwriting titles," said Andrew Rovito, director of finance for InterGen.
The natural gas-fired, combined cycle power facility follows two other North American projects named Redbud and Cottonwood, which closed last year. The Redbud project was a 10-year mini-perm, securing $558.8 million in October and Cottonwood, was structured as a seven-year mini-perm, securing $568 million last February. Rovito pointed out that by the third deal, closing time shortened significantly as lead lenders were selected ahead of time. It took Cottonwood nine months to one year to close and only took funding for Magnolia two months to complete from beginning discussions with bankers to final documentation. "The structure for Magnolia was taken from Cottonwood. Therefore, the documents were basically negotiated and it was a matter of meeting [pre-set] conditions to fund Magnolia," explained Rovito. "The banks in the Magnolia primary closing participated in Cottonwood and Redbud so they were familiar with the structure," he added.
Deutsche Bank and BNP Paribas led Cottonwood; Citibank and Dresdner led Redbud. The lead banks for the projects are core InterGen relationship banks that have also taken part in InterGen's overseas projects. The mini-perm structure was introduced as a new structure about three years ago, replacing more traditional project loans that have maturities that extend beyond construction. The mini-perm deals cover two years of construction time and have an option built in whereby borrowers can replace financing with other long-term debt. Very often companies tap the bond market, which is construction-risk averse, for future long term financing.