Targa Resources' $2.4 billion senior secured credit broke in the secondary market last week. The $1.15 billion term "B" loan broke at 100 1/4 and traded as high as 101. Its $700 million asset-sale term loan traded at 100 1/8. The deal also includes $300 million synthetic letters of credit program. A trader said the credit, which was oversubscribed, traded well because of the company's sector. "Energy is popular because oil prices are going crazy," he said.
The new credit, which backs Targa's acquisition of Dynegy's Midstream natural gas business, has drawn a B+ rating from Standard & Poor's. It has a recovery rating of 2, which indicates an expected 80%-100% recovery of principal if it defaults. The facilities are secured by a first lien on stock and assets. Targa has a B+ corporate credit rating, which reflects its highly leveraged balance sheet, constrained cash flow and exposure to volatile commodity prices. The rating also takes into account Dynegy's good performance record on Chevron contracts and Targa's top market position in all its business segments.