CIBC World Markets and Deutsche Bank's $278 million credit for Trans-Elect, backing the acquisition of The Michigan Electric Transmission Company was well oversubscribed only hours after launch last Wednesday. The loan is split into a $200 million "B" tranche at the operating company level, a $25 million revolver, and the remainder is an up to $53 million loan at the holding company level. Pricing on the "B" and revolver is LIBOR plus 23/ 4%, while the holding company loan is priced at LIBOR plus 33/ 4%. "The holding company loan is structurally subordinated to the opco loan," said a banker, explaining the differential. A flex has not been decided on yet, he added.
CIBC and Deutsche Bank were selected to lead the credit through a strong relationship with the treasurer Martin Walicki. Additionally, the two showed an interest in the business way ahead of other banks, according to Walicki (LMW, 1/28). The purchase marks the first U.S. sale of a major utility's electric transmission system to an independent company. A law passed in Michigan required the state's major electric utilities to either divest their electric transmission system or turn over operating control to an independent entity.