J.P. Morgan, Credit Suisse First Boston and Lehman Brothers are all playing a role in the debt financing for Kohlberg Kravis Roberts & Co., J.P. Morgan Partners and Wachovia Capital Partners’ $880 million equity purchase of UniSource Energy. The acquiring group will use $557 million in equity and $660 million in debt financing to fund the acquisition, stated Kevin Larson, UniSource’s v.p., cfo and treasurer, during a conference call.
Larson added that the debt financing will consist of $360 million in bank debt and a note of approximately $300 million. The proceeds will also go toward a $260 million contribution to Tucson Electric Power Co., UniSource’s principal subsidiary. The company’s EBITDA is approximately $336 million. KKR will provide 60% of the equity, J.P. Morgan Partners around 35% and Wachovia around 5%, according to a source familiar with the deal. The private equity firms have formed a company called Saguaro Utility Group that is buying UniSource’s common stock for $25.25. The transaction will also include the assumption of approximately $2 billion in debt. It could not be determined what will happen to this debt once the transaction is complete. UniSource serves approximately 550,000 customers across Arizona.