El Paso Corp. has inked a $400 million, six-month secured revolver with Fortis Capital as it gears up for winter and potential short-term spikes in natural-gas prices. The additional capacity is needed to write letters of credit that act as collateral for gas hedges, said Ben Tsocanos, analyst at Standard & Poor's. The revolver is collateralized by El Paso's natural gas reserves, and it was executed as a private placement since El Paso does not have a shelf registration and the private placement market offered a quick turnaround, says Bill Baerg, investor relations manager.
Pricing on the revolver varies based on the level of borrowings; if less than 50% of the capacity is tapped, the rate is LIBOR plus 175 basis points. The rate increases by 25 basis points if 50% is used. If 75% is used, the rate inches up another 25 basis points and will settle at 250 basis points if 90% is used.
In addition to this revolver, El Paso has $3 billion in revolving credit, of which $1.2 billion has been borrowed and $1.6 billion has been tapped for letters of credit, says Baerg.