Regency Energy Partners tapped UBS, Wachovia and Citigroup for an $850 million credit facility for the acquisition of TexStar Field Services. The facility will be used to pay for the $350 million acquisition and refinance approximately $400 million of existing debt, according to Ramon Suarez, treasurer.
The deal's five-year, $250 million revolver is led by the trio and its seven-year, $600 million term loan "B" is led by UBS and Wachovia, according to Suarez. Pricing is LIBOR plus 2% for the revolver and LIBOR plus 2 1/4% for the term loan.
The acquisition of TexStar is expected to add approximately $40 million to 2007 EBITDA, creating a total leverage estimate of 4.9 times, according to a banker. "We went from half [of the amount of] EBITDA last year to this year and now looking at next year it's a good thing," Suarez said. EBITDA increased 43% in 2006 to $16.4 million from $11.5 million in 2005.
Regency had an initial public offering of stock in early February, but is looking to offer more. "We're offering more shares to the community. We're letting everyone else share in the wealth," Suarez noted.
Regency hit up UBS and Wachovia in 2005 for a $470 million facility, broken into a $150 million revolver, a $300 million term loan "B" and $20 million of letters of credit. Citigroup was not a lead on the previous facility because it took the bank too long to get on the same page as Regency, Suarez said. A Citigroup spokeswoman declined comment.
San Antonio-based TexStar was assembled by HM Capital the private equity firm formerly known as Hicks, Muse, Tate & Furst through nine separate acquisitions of South Texas drilling companies that were inactive or underutilized assets. Regency Energy, based in Dallas, is a midstream natural gas service provider. Calls to Stephen Arata, cfo, were not returned.