Citgo's Banks Syndicating A New $850 Million Line

Citgo Petroleum Corp.'s lead banks are counting on the company's improved capital structure to win the day as they seek to syndicate a new $850 million credit line.

Since the revolver was only partially underwritten, the outcome of the syndication is as important to Citgo as it is to the lead banks.

Continental Bank is agent, and Bank of America and Royal Bank of Canada are coagents.

The banks were prepared to underwrite the entire credit, but Citgo went with the partially underwritten alternative.

"I'm sure price was a consideration," said a banker familiar with the situation.

Similar Pricing

The new credit line is said to be priced similarly to an existing bank line obtained in early 1990.

Although that credit was successfully syndicated, there were some complaints then that it was priced too thinly for a borrower as highly leveraged as Citgo.

But the company's capital structure is about to improve "dramatically" through the conversion of subordinated debt into equity, a Citgo banker said.

Details of the planned conversion, as well as specific terms of the new revolver, were not disclosed by Citgo or by its agent banks.

Venezuelan Parent

Citgo is wholly owned by Petroleos de Venezuela, a state-owned oil company.

Citgo will use the $850 million revolver to consolidate two credit lines totaling $760 million. The remainder will be used for capital expenditures.

One of the two existing credits, a $600 million revolver, was obtained early last year by a Continental-led group with Bank of America and Royal of Canada as coagents.

A separate $160 million loan to a Citgo subsidiary, Champlin Refining and Chemical Inc., will also be refinanced with the new revolver.

Pitched in Houston

Morgan Guaranty Trust Co. was lead bank for the Champlin credit, but lost out to the Continental-led group for the new arrangement, banking sources said.

The new revolver was pitched at a bank meeting in Houston on Monday that was attended by members of the existing Citgo syndicate, as well as about a dozen other banks.

An official at one of the lead banks said the meeting went "extremely well" and held out the prospect that the credit would be oversubscribed.

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