Dominion Resources is interviewing banks to provide the financing to back the $2.3 billion acquisition of Louis Dreyfus Natural Gas. Scott Hetzer, senior v.p. and treasurer, said Dominion will have to come up with a $1.1 billion bridge loan that would be taken out by $900 million in bonds and $200 million in trust preferred securities. Dominion is talking to a group of banks at the moment about providing the financing, both the bridge loan and the bonds. No decisions have yet been made, Hetzer said. According to bankers, Merrill Lynch is believed to have an inside track on the financing because it is advising on the transaction, but Hetzer said Merrill would not necessarily lead the financing. Hetzer declined to name the banks being interviewed. He said the timeframe for having a commitment in place is before Nov. 1, when the deal could close. Officials at Merrill Lynch declined to comment.
Dominion will issue to Louis Dreyfus natural gas approximately 14.4 million shares valued at approximately $900 million and $890 million in cash. Dominion will also assume about $505 million in Louis Dreyfus debt. Of that debt, $200 million is bank debt that will be refinanced after the transaction closes, said Hetzer. Despite bearish sentiments on the natural gas industry, Hetzer said long-term Dominion is bullish. "Dominion believes gas prices four or five years away will be higher," he stated.