Citibank is in the market with a $1 billion deal for Premcor, refinancing an existing $785 million loan led by Deutsche Bank. Citi came to Premcor with the most compelling proposal, according to Joe Watson, Premcor's treasurer. He declined to comment on whether Deutsche Bank also pitched a deal.
Watson said there was a lot to like about the new deal. "We have an opportunity to redo our credit facility for an increased limit," he said. "It provides greater flexibility, cheaper rates, plus it lowers our costs associated with issuing letters of credit." The facility comprises a $900 million asset-based revolver and $100 million "B" loan. Letters of credit will be issued from the "B" loan. "The term 'B' tranche reflects our expectations of having permanent letter of credit drawing needs at that level," Watson said.
The revolver will be priced between LIBOR plus 2-21/2% and the "B" loan is being priced at LIBOR plus 21/4%. The previous loan was priced around LIBOR plus 31/4%, Watson said. Syndication launched March 23. Premcor is an independent oil refiner and wholesale marketer of petroleum products. Citi bankers and a Deutsche Bank spokesman did not return calls.