UBS launched syndication of a $480 million deal for Regency Gas Services last Wednesday. The deal includes a $170 million revolver and a $310 million first-lien term loan. Both tranches are priced at LIBOR plus 2 1/4%. Proceeds of the transaction will be used to repay Regency's existing second-lien term loan and outstanding debt under its revolver. Regency is a Dallas-based midstream gas gathering, processing and transmission company owned by Hicks, Muse, Tate & Furst.
There are two phases to the deal, explained Stephen Arata, executive v.p. and cfo. The first is that the company is borrowing $50 million additional first-lien debt to pay down the second lien and to decrease pricing. It is also changing CAPEX covenants upwards to "be a bit more consistent with our current business plan, about [an additional] $15 million a year," he said. The company is also planning an initial public offering and is in the midst of the Securities and Exchange Commission review process. Moody's Investors Service affirmed Regency's B1 corporate family rating and first-lien term loan facility.
The bank first launched a $400 million facility for Regency in July that amended and restated existing debt while adding $110 million to fund the build out of a gas pipeline in Louisiana. The credit consisted of a $90 million revolver, a $248 million first lien and a $62 million second lien. Pricing on the revolver and first lien was LIBOR plus 2 3/4% and pricing on the second lien was LIBOR plus 6% (LMW, 7/4). Later in the month, the bank increased the revolver by $60 million, and $12 million was shifted from the second lien into the first lien due to oversubscription. Pricing did not change. In early June the company said it would extend an existing intrastate gas pipeline located in northern Louisiana. The project was expected to cost about $125 million with Hicks, Muse kicking in the other $15 million (7/22).