Lehman Brothers is launching a $1.225 billion bank deal for Tesoro Petroleum in New York on March 20, with a $750 million "B" tranche included in the package. "The funds are partly new money backing the acquisition of the Golden Eagle refinery from Valero Energy and also refinancing debt from the financing backing the BP refineries buy last fall," said one banker familiar with the transaction. The loan will include a $225 million revolver and a $250 million "A" term loan. Pricing on the pro rata is LIBOR plus 21/ 2% and LIBOR plus 3% on the "B". The "B" will retain the LIBOR floor instituted on the BP transaction, designed to assuage the fears of loan-participation funds suffering from the record low LIBOR rate (LMW, 10/14).
Existing accounts will be approached from the previous loan, the banker said, and a rollover is expected. The paper has traded at 101 and already unsolicited tickets have been received, he added. The company raised $246 million through an equity offering this month and is also planning $450 million in bonds to accompany the loan package, the banker noted. Lehman, Goldman Sachs and Friedman, Billings, Ramsey & Co, served as co-managers on the equity offering.