CIBC World Markets and BNP Paribas have joined Deutsche Bank at the top tier of the $500 million credit for Magnum Hunter Resources. The new credit line partially funds the merger with Prize Energy and also refinances the existing credit lines of both companies (LMW, 2/25). Chris Tong, Magnum's senior v.p. and cfo, explained the banks will be agents, though Deutsche Bank has fully underwritten the loan. Magnum is an independent exploration and development company, involved in the crude oil and natural gas markets.
More banks will be invited into the top tier and then a retail bank meeting will be held to syndicate the credit further, Tong said, though no definite date has been set yet. Pricing on the deal is LIBOR plus 2 1/4% on the three-year line. Tong confirmed Deutsche Bank beat out tough competition to lead the deal, noting a variety of factors won it the lead role. "It was not just pricing, frankly up-front fees and a credit agreement that is marketable were important," Tong noted. He declined to name the specific banks that sent competing term-sheets.
Lending attitudes to the sector run against the current tide in the market. He said market reception to his sector is currently better than it was two years ago. "For our sector it is a good market, but not robust. Because of other energy credits, rightly or wrongly, people are more careful. But, this is a borrowing base credit," he commented. Deutsche Bank leads the incumbent Magnum line, which is being amended to increase the borrowing base from $160 million to the $500 million level. Last fall, Magnum increased the borrowing level from $35 million to $160 million by acquiring oil and gas properties in New Mexico that acted as collateral (LMW, 10/7).