Lehman Brothers' $300 million, six-year term loan "B" for Tesoro Petroleum raced to $100 million in commitments within a day of launch on Sept. 5 as investors cited the attractiveness of the company and sector, as crack spreads continue to show healthy margins. The crack spread is the synthetic measure of margin for the oil refining industry that compares the difference between heating oil and crude oil, as well as between gasoline and crude oil. Historically, the sector has been less hot, said a banker, though throughout the year spreads have been good.
The "B" loan is part of a $1 billion financing package backing the $677 million acquisition of BP's Mandan, Salt Lake City refineries and pipeline, distribution and gasoline marketing operations. The rest of the deal breaks down into a $175 million revolver, an $85 million term loan "A" and a $90 million delayed-draw term loan. The pro rata portion has a spread of 21/ 4% over LIBOR, while the institutional is LIBOR plus 23/ 4%. A $350 million capital markets facility will also be launched. BANK ONE, Bank of America, Credit Lyonnais and ABN AMRO have taken roles on the credit.