Houston-based Equistar Chemicals has secured an $800 million bank deal and sold an upsized $700 million offering of 144A seven-year notes as it seeks to refinance debt. Pat Quarles, director for investor relations, said the producer of ethylene and petrochemical substances wanted to extend maturities on existing debt and maintain a healthy mix in the capital structure. Equistar has a $1.25 billion credit facility that matures in November next year and has $986 million drawn on it, he noted. He declined to comment on the exact structure of the loan as the deal has not yet fully closed. The five-year revolver, which according to bankers is led by J.P. Morgan and Bank of America and totals $500 million, funds short-term cash needs. Quarles declined to confirm banks on the deal. The six-year $300 million term loan "B" enables flexibility, he explained, noting there are no penalties for pre-payment on a term loan, which occurs on a bond issuance. Credit Suisse First Boston and Salomon Smith Barney led the note offering, which was originally slated at $500 million of seven-year, non-call senior unsecured notes. Originally the term loan was $500 million but was downsized in favor of the notes. Quarles would not comment on reasons for the switch in favor of the notes. J.P. Morgan and B of A led the last credit facility in 1999. Standard & Poor's has assigned a BBB rating to the credit facilities, citing the strength of the collateral package in a default scenario, but also the ongoing deterioration of business conditions in the petrochemical sector. Ratings could be lowered if profitability continues to suffer in an industry hit by elevated natural gas based feedstock and energy costs.
Chemical Co. Concocts Refinancing Plan