Energy XXI turned to BNP Paribas to obtain an expanded second-lien financing that allowed the Bermuda-based energy company to raise capital without a credit rating and a U.S. registration. This second-lien credit, along with an increased revolver, provided funding for an acquisition of oil and gas properties in the U.S. Louisiana Gulf Coast, as well as for general corporate purposes.
West Griffin, cfo, said the increase to its second-lien loan provided the company with a good alternative to raising capital in the public debt market. He said the company will likely refinance the loan with public debt in the next 12-to-18 months once it has obtained a U.S. registration and credit ratings. He said the company will do this to lower borrowing costs and expand the tenor of its financing.
The company increased the second lien by $250 million to $325 million. Pricing was bumped up 50 basis points to LIBOR plus 5 1/2% to account for the increased size. The deal was originally slated to be $300 million, but was increased after the deal was oversubscribed (CIN, 8/18). Griffin said the company chose BNP Paribas to lead the loan because of a previous relationship with the bank and its experience underwriting these types of deals. "BNP has done a large number of second liens," said Griffin.
It also expanded its existing first-lien revolving credit facility by $115 million to $260 million. The Royal Bank of Scotland leads the first-lien revolver, which has a LIBOR plus 1 1/4 - 2% coupon, which changes according to the amount drawn under the revolver. The pricing structure did not change following the size increase. Griffin said he has a long-standing relationship with the bank from his previous roles at Alon USA and InterGen North America.
The loans not only finance the company's August acquisition of oil and gas properties in the U.S. Louisiana Gulf Coast, but are also available for further exploitation of existing reserves, said Griffin. Energy XXI was formed in July 2005 to invest in the energy industry through acquisitions of oil and gas reserves.