Houston-based El Paso Energy Partners, a provider of mid-stream gas services in the Gulf of Mexico, has closed a $600 million, three-year revolving credit facility with J.P. Morgan Chase. The deal comes on the back of a private offering of $250 million of 10-year, 8.5% senior subordinated notes, said Sandra Ryan, director of investor relations. "El Paso has an aggressive expansion plan that includes spending $500 million per year on acquisitions and growth over the next five years," she said, declining to be more specific on potential targets.
Chase Manhattan was the previous lead agent on a $500 million revolver, priced on a leverage grid ranging from LIBOR plus 1 1/2 % to LIBOR plus 2 1/2%. The increased amount improves flexibility, while the new deal is at a lower spread, Ryan said, declining to provide figures for pricing on the credit. The note offering was intended to reduce borrowing under the old revolving credit, while the new credit's pricing benefits from improved ratings from Moody's Investors Service and Standard & Poor's, Ryan commented.
Credit quality is enhanced by the continued participation of general partner El Paso Corp., which is committed to transferring assets at book value to El Paso Energy Partners, in an effort to reduce leverage. The expected growth in gas production benefits El Paso Energy Partners' strategically located gas pipelines and storage assets. Furthermore the company continues to focus on fee-based businesses such as platform services and pipelines, which provide stable and predictable revenue, shifting away from the commodity cyclicality of the oil and gas exploration and production segment.