Energy holding company PNM Resources has closed two credit facilities totaling $1 billion to support its acquisition of energy provider, TNP Enterprises and its subsidiaries, Texas-New Mexico Power and First Choice Power. The first facility a $600 million revolver increases the size and extends the maturity through August 2010 of its existing $400 million facility. The second credit is a $400 million line that replaces am existing $300 million facility. The company did not disclose the pricing of the transactions. But Terry Horn, acting cfo of PNM Resources, said there is a 24 basis points improvement over the previous revolvers.
Horn said the company benefited from an eager lending market. "Pricing is excellent in the market," he said. "Terms and conditions are not as stringent. There are a lot of banks willing to provide capital."
The $600 million facility provides working capital to Texas-New Mexico Power and First Choice Power, which PNM acquired in June. The $400 million facility increases First Choice Power's borrowing capacity to $300 million from $100 million. The company is seeking to expand First Choice's operations by either building or acquiring additional power plants.
Bank of America and Wachovia Bank lead the $600 million credit facility, which has 17 other lenders. Wachovia Bank and Union Bank of California lead the $400 million facility. Horn said the company rotates the banks it uses to lead each transaction to give each a chance to lead a deal. "Banks welcome it because they feel there is a level playing field. It is good for the banks' marketing and they can earn fee income," said Horn.
He added that the company seeks to foster strong ties with its banks and prefers them to retain the majority of debt rather than sell it down in the secondary market. "We're interested in keeping relationships with the banks. It suggests to me that they support us," said Horn.