Tesoro Petroleum will return to the bank market for financing to back the $945 million acquisition of the Golden Eagle refinery from Valero Energy. Tesoro will also purchase the value of inventory, estimated to be $130 million. Lehman Brothers is said to be leading the financing, which will result in $375 million in term loans, a $70 million revolver, $450 million of subordinated debt and an up to $250 million equity component. The financing will be done "as soon as possible," said a banker, unable to provide more precise timing. Bankers at Lehman and Tesoro officials did not return calls.
The existing bank group and institutional investors, brought on board for the term loans backing the BP refineries acquisition last fall, will be approached, said a banker. Lehman won plaudits for the deal after instituting a LIBOR rate-floor to assuage investor fears over plummeting LIBOR rates (LMW, 10/14). The deal breaks down into a $450 million "B" tranche, a $175 million revolver, an $85 million "A" term loan and a $90 million delayed draw term-loan. Pricing on the pro rata is at 4% all-in. Other banks on the credit are BANK ONE, Bank of America, Credit Lyonnais and ABN AMRO.
Pricing on the new term loans is expected to be slightly higher than the 5 3/4% all-in rate, due to the increased leverage, said a banker. At closing Tesoro will have a debt to capital ratio of 66%, with the transaction hot on the heels of the BP acquisitions'. The Federal Trade Commission, as a condition of Valero's merger with Ultramar Diamond Shamrock mandated the divestiture of the Golden Eagle refinery and its retail assets last year. The transaction is expected to close in April 2002