NorthWestern Corp. plans to emerge from bankruptcy next month with holders of a pre-petition, $390 million term loan paid back with a $3.9 million premium and new, cheaper financing for the company pitched to the market. Lehman Brothers and Deutsche Bank are slated to lead a $250 million bank facility and Credit Suisse First Boston is sole lead on a $200 million bond issue that will repay old bank debt, noted Roger Schrum, head of investor relations at the electric and natural gas provider.
Pricing on the new loans and bonds is substantially improved, Schrum stated. The proposed bank facility consists of a $125 million, five-year revolver and a $125 million, seven-year "B" loan. Price talk on the revolver and term loan is LIBOR plus 1 3/4% and LIBOR plus 2%, respectively. "We are eliminating a substantial amount of debt, which improves our credit profile," he noted. NorthWestern filed for bankruptcy in September 2003 and has reduced debt from $2.2 billion to $900 million through a debt-for-equity swap and asset sales. The holders of the company's senior unsecured notes will receive 92% of the reorganized company.
The new financing will take out the $390 million term loan led by CSFB and a Bank One-led $50 million debtor-in-possession facility. The $390 million term loan was completed in February 2003 when banks were shying away from lending to utility companies. Hedge funds and institutional lenders stepped in, providing a loan that was priced at LIBOR plus 5 1/2% with a 3% LIBOR floor and was non-call for four years. It also carried call protection of 103, 101 in years four and five and was backed by first mortgage bonds (LMW, 12/22/02).
Call protection of $3.9 million will be paid to the lenders, said Schrum, noting that the original provisions, including the non-call and premiums, were changed when the company was in bankruptcy. NorthWestern had the opportunity to take that facility out by extending the DIP to $400 million, he noted. Instead, "We renegotiated, reducing interest rates and changing some of the terms." One lender on the credit said when the company entered bankruptcy, Bank One offered to provide a term loan as part of the DIP that would have taken out the deal. "Although the deal was subject to a make-whole if they wanted to prepay us, there is apparently significant precedent of bankruptcy judges disregarding non-call provisions and thus we would have been taken out of a very attractively-priced loan at 100--when it had traded as high as 103." The company instead accepted the competing deal with the removal of the LIBOR floor and non-call provision, he added.
In October 2003 the terms of the loan were amended so that the spread was reduced to LIBOR plus 3 1/2%. This resulted in projected savings of $6-8 million a year in interest costs. A CSFB spokesman confirmed the call protection had been dropped as part of the post-bankruptcy reorganization plan. He added the repayment at 101 was consistent with the financing agreement that went along with this bankruptcy plan.
Fees and expenses for initially arranging the $390 million loan were $24 million, according to a Securities and Exchange Commission filing. The lenders assembled by CSFB included Ableco Finance, AIG Global Investments, American Express Asset Management, Anchorage Capital Partners, Angelo Gordon & Co., Black Diamond Asset Management, Farallon Capital, Fidelity Advisors and Highland Capital Management.