TD Securities and Credit Suisse First Boston launched a $400 million credit facility for Tucson Electric Power, a subsidiary of Unisource Energy, last Friday. The credit consists of a six-year, $200 million "B" term loan and a five-year, $200 million pro-rata piece split into a $60 million revolver and a $140 million "A" term loan. Pricing on the institutional piece is set at LIBOR plus 31/ 2%, but the spread on the pro-rata portion was not set as LMW went to press. One banker said the spread is likely to be LIBOR plus 3% with a facility fee of 50 basis points. Bankers at CSFB and TD did not return calls by press time.
The credit, which refinances existing debt, is rated BB+/Ba2. The Ba2 rating reflects ample cash flow, a growing service territory, successful cost control and a strong management team, according to Moody's Investors Service. The rating, however, also reflects Tucson Electric's high leverage and low interest coverage, unpredictable regulatory environment and high concentration of industrial customers, Moody's noted. One banker familiar with the deal pointed out that Tucson Electric's biggest selling point may be that it is a traditional, conservative power company with no trading operations to speak of. Calls to Kevin Larson, cfo and treasurer, were not returned.