Peabody Energy is looking to arrange a $1.35 billion package of loans to refinance and restructure existing borrowings, according to Power, Finance & Risk, an LMW sister publication. The privately owned coal giant is looking to pay down a "B" loan through a traditional bank term loan, according to Walter Hawkins, treasurer.
"It's mainly been going the other way," said Pat Kunkel, director of project finance at Erste Bank, commenting on Peabody's decision to shun the "B" loan market. The Enron debacle discouraged banks from lending to the merchant energy industry, "but now they are starting to feel that it's ok to come back in," he added.
Last week Bank of America and Wachovia Securities launched syndication of a $450 million "A" loan to replace a $450 million "B" tranche. The banks are also marketing a new $900 million revolver, according to Hawkins. The new facilities are being pitched at LIBOR plus 1 1/4%, said a market watcher. The existing revolver is priced at 1 3/4% and the "B" loan carries a 2% spread over LIBOR.