Power Finance & Risk
iipower.com
U.S.
March 16, 2003
Reliant Refinancing Adds 'No Proprietary Trading' Clause
Reliant Resources, which announced earlier this month that it had taken a $80 million trading loss on a speculative position, agreed with banks to include a covenant clause in its planned $5.9 billion refinancing that will explicitly bar the company from taking proprietary trading positions. One banker close to the talks says the covenant only allows the Houston player to trade around its assets. The company is working toward a March 28 deadline to re-work the $5.9 billion in straight loan and lease facilities (PFR, 2/24).
Despite the news of the loss, lenders think the deal will be agreed before the deadline. "In this case, as with the other troubled deals, the bank focus is to avoid a [bankruptcy] filing," says one lender in the deal. On the table is a five-year deal with pricing of LIBOR plus 400 basis points on the old debt being extended and LIBOR plus 550 basis points for a $300 million new senior secured facility. One financier says lenders are still pushing for juicier pricing, but there has been no movement from the company on that front.
As part of the announcement of the loss, Reliant management said the company would stop proprietary trading, but one market official notes the loan clause is simply a way for the banks to strengthen that commitment. |
