A price change on the $5 billion deal for Kerr-McGee is looking more likely after investors predicted the initial spread would come up short. Investors are being told by the lead agents that pricing on the term loan "B" will be in the LIBOR plus 2 1/4% to 2 1/2% range, up from LIBOR plus 2%. The revolver and term loan "X" are now being pitched at LIBOR plus 2% from LIBOR plus 1 3/4%.
J.P. Morgan and Lehman Brothers are leading the facility, which comprises a five-year, $1 billion revolver; a two-year, $2 billion "X" term loan; and a six-year, $2 billion term loan "B" (LMW, 4/25). Investors said the initial pricing was too low considering the size of the credit and the softening of the market.
The loans will fund a modified Dutch auction tender offer for up to $4 billion of common stock. The company anticipates a mid-May close. Last Thursday Kerr-McGee released its first quarter results, reporting a net income of $354.5 million in the 2005 first quarter as compared to $152.2 million in the first quarter of 2004. This was due to higher oil and natural gas sales prices and volumes and improved chemical operating results.