PG&E National Energy Group closed a $1.25 billion deal last month after it paid down its existing $1.1 billion deal as part of an effort to consolidate the business. The deal breaks down into a $500 million, two-year tranche and a $750 million one-year tranche. "The new deal is part of our financial strategy. We moved the debt up a layer in the corporate structure," said John Cooper, senior v.p. finance. The company has been in the process of a restructuring plan since National Energy Group formed in December 1998, he explained. First the company did a bond issue then worked on bank financing. The original deal was under PG& E Corporation. National Energy Group, a subsidiary of PG&E Corp., develops, owns and operates electric generating and gas pipeline facilities and provides energy trading, marketing and risk-management services. It is headquartered in Bethesda, Md.
The company stayed with original lead J.P Morgan and did not go out to bid. "We have a group of leading lenders we work with," said John Barpoulis, v.p. financing and treasury. Dresdner Bank and Royal Bank of Scotland are co-syndication agents. There are 10 banks in the syndicate that each committed $100 million. The company also recently did a $1 billion bond deal. The bank facility is a revolver to support trading through issuance of letters of credit and for general corporate purposes.
Pricing is based on a rating grid and is adjusted. Currently, the deal is rated BBB/Baa2 and has all-in pricing of 21/ 2% over LIBOR. "The pricing reflects the affiliation and ownership by PG&E and the California energy crisis. Pricing has a premium in it surrounding utilities," said Cooper. "It's higher than the old deal because the spreads for the industry have reflected premiums by California utility PG&E." Cooper said the company is always open to discussions with other banks.