Houston-based Newfield Exploration recently wrapped a three-year, $300 million credit backing its $333 million acquisition of Lariat Petroleum in late January and added a $125 million tranche to bump up the credit to a total $425 million the next week.Susan Riggs, treasurer, said the company originally launched the $300 million credit to close the deal, but then decided to add another tranche for general corporate purposes. "We only used $265 million of the facility for the acquisition and funded the rest with stock," explained Riggs. The credit was led by J.P. Morgan Chase and Bank of America. Riggs said 15 other banks comprised the syndicate.
The credit was priced at LIBOR plus 1 1/4 % and its pricing is tied to both the company's credit ratings and a debt to EBITDA ratio. The facility replaces the natural gas production and exploration company's three-year, $225 million facility signed in 1997 also led by J.P. Morgan Chase. Riggs said the new credit was oversubscribed and closed Jan. 31, 2001.
Riggs explained that the company retained Chase as a co-lead on the credit and did not go out to bid because of its long-term relationship with the bank and its satisfaction with its old facility. The company added Bank of America as a co-lead because the bank historically led credits on behalf of Lariat. "We terminated the old facility because we knew we needed more than $225 million to get the acquisition done," said Riggs, explaining why the company did not tap its existing five-year credit maturing in 2002. "It was easier to sell the new facility to banks rather than add-on to the old facility," she said. Riggs explained that the company was looking to increase its capacity and anticipated roughly the same pricing on a new facility or a renegotiation of the old credit.