Public Service Electric and Gas Co. (PSEG) entered into a new five-year, $600 million revolver, putting a longer tenor in place than the industry has seen in some time, according to Mort Plawner, PSEG's treasurer. "We haven't seen these kinds of terms in quite a while," Plawner said. "It reflects the confidence investors have in the sector. Investors happen to like the utility business."
The new revolver has a tenor of five years and replaces a three-year, $200 million revolver due in June 2005 and a 364-day, $200 million revolver that matured this month. "We decided to put one facility in place right now and cancel the one that was expiring next year," Plawner said. "Anytime you can get a longer facility, that's a plus for the company. It takes the refinancing risk off the table." The new credit was established to address the upcoming maturities. "The market was right and so we decided to renew and extend the term as long as we could and upsize as well," he added.
The company decided to increase the size of the facility due to commodity prices. "Prices have increased substantially over the last year or two," Plawner noted. "A lot more volatility in prices causes us to require a little larger working capital positions. We expanded the facilities to meet the increased working capital need." The revolver is priced at LIBOR plus 5/8% and is in the same ballpark of the previous pricing, Plawner said. J.P. Morgan and Wachovia Capital Markets are the leads on the credit. J.P. Morgan was the previous lead and Wachovia was an existing primary lender.