Plains All American Pipeline has amended its credit facility to allow room under its covenants for the acquisition of a crude oil pipeline in West Texas from Shell Pipeline, according to Al Swanson, treasurer. Among the covenant changes is a temporary relaxing of the company's leverage ratio. Until March 30, 2003, the company only has to meet a debt-to-EBIDTA ratio of five times rather than four times, Swanson noted. Plains All American drew on its credit to finance the $315 million acquisition, but it has since raised $145.1 million in the equity market to reduce its debt.
In conjunction with the amendment, Plains All American put in a provision to access an additional $150 million for its letter of credit and hedged inventory facility, Swanson noted. This provision was designed to increase financial flexibility and joins the company's existing $200 million letter of credit and hedged inventory tranche, he said. If tapped, the new borrowing capacity will be priced at the same rate as the existing tranche, which currently is set at LIBOR plus 15/ 8%.
The existing credit facility, which is led by FleetBoston Financial, also comprises a $400 million domestic revolver and a $30 million revolver for the company's Canadian subsidiaries. Pricing for both are tied to a leverage-based grid, with the lowest pricing set at LIBOR plus 2%. A $100 million term loan designated for the company's Canadian subsidiaries and a $200 million "B" term loan round out the credit. These tranches also are priced against a leverage-based grid, with the lowest pricing set at LIBOR plus 21/ 4% and LIBOR plus 21/ 2%, respectively.