Fort Worth, Texas-based Range Resources, an oil and gas company, has refinanced its bank line and trimmed the number of banks in the group. "We had 12 banks in 1999, but that was for a $300 million facility, which we scaled back to $120 million," said Rodney Waller, senior v.p. of Range. "Having less banks makes it more manageable and the paperwork easier," Waller commented. He declined to name the banks no longer in the syndicate. The bank group is now seven, and consists of BANK ONE, J.P. Morgan, Credit Lyonnais, Fleet National Bank, Fortis Capital, Bank of Scotland, Compass Bank and Natexis Banques.
He explained the company spun off a venture, in which it has a 50% stake, called the Great Lakes, which has its own $275 million non-recourse loan. Even though the spinoff enabled Range to cut down on the bank line, the same group of banks remained until the redux. "The old facility was maturing in a year and we wanted to flip it and add some flexibility," Waller said, referring to the timing of the new facility and the strategy underpinning the move.
The increased flexibility is seen in two ways. The company can reinstate dividends without an amendment and as the company retires junior sub debt, the borrowing base can increase, Waller noted. The $120 million borrowing base on the old three-year loan has also been upped to $135 million and may increase another $10 million if the company retires more trust preferred and subordinated debt, he said. Pricing on the line has decreased slightly and covenants have been relaxed, he added. Tied to a usage grid, the spread ranges from LIBOR plus 11/ 2% to 21/ 4% and there is a 3/8% to 1/2% commitment fee. Right now it is at LIBOR plus 2%, he stated. The cheaper pricing is a reflection of the equity issuance in exchange for debt securities and the Great Lakes spinoff, he said, adding, the banks on the Great Lakes loan are similar to the Range bank group. Standard & Poor's and Moody's Investors Service rate the bank loan BB- and Ba3.