Lehman Brothers has launched syndication of a $312 million deal for Thermal North America for a recapitalization. The credit comprises a six-year, $35 million revolver; an eight-year, $30 million synthetic letter of credit; and an eight-year, $247 million term loan. Pricing on all tranches is LIBOR plus 2%.
Proceeds from the facility, combined with an equity contribution from sponsor Sowood Capital Management, will recapitalize the acquisition of a portfolio of 10 district heating and cooling systems (DHCS) from Trigen Energy Corp. in June and the acquisition of the remaining 50% ownership in Grays Ferry Power Plant from Calpine Corp. in July. The letter of credit facility will be issued at closing to back fuel commodity hedges, according to Moody's Investors Service.
Moody's assigned a Ba3 to the facility, saying the ratings reflect the stable and predictable cash generated by Thermal's diverse portfolio of DHCS assets. These assets provide heating and cooling under long-term contracts to more than 1,000 customers; universities, medical centers, property managers and the government make up the majority of its customer base. Revenue from steam sales are expected to account for about 70% of Thermal's consolidated revenue with about 14% attributed to electricity. A call to Sowood was not returned by press time.