Credit Suisse First Boston is expected to bring to market this month $1.9 billion of loans to support CalEnergy Co.'s planned hostile takeover of New York State Electric and Gas Corp.
The package includes $400 million in revolving credit facilities for the acquisition and a $500 million bridge loan.
The bridge loan initially will be priced at 600 basis points above the London interbank offered rate. After six months the pricing will increase by 100 basis points over Libor. After each additional three-month period, the pricing will increase by 50 basis points over Libor.
The rest of the package-a $650 million five-year term loan and a $350 million five-year revolving loan-will be used to provide working capital for CalEnergy's New York subsidiary, CE Electric Inc.
In July CalEnergy began a tender offer for 9.9% of New York State Electric and Gas shares at $24.50 each. The tender offer is to expire Thursday.
On Aug. 6 New York Electric and Gas petitioned the New York Public Services Commission to block the tender offer. But CalEnergy still expects the tender offer to be successful.
After the offer expires, the company plans to purchase remaining New York Electric and Gas shares for $27.50 each, which would value the target company at $1.9 billion.
Credit Suisse First Boston is the administrative agent for the loans, and Lehman Brothers is serving as the documentation agent for the revolving credit facilities, according to a Credit Suisse banker. The two banks are also serving as co-advisers for the acquisition.
Credit Suisse has long been the banker for the Omaha-based independent power company. The bank has financed a number of acquisitions for CalEnergy, including the company's January acquisition of Britain's Northern Electric PLC for $1.31 billion. The bank also financed CalEnergy's $957 million hostile buyout of Magma Power Co. in 1995.
Craig Hammett, vice president and chief financial officer of CalEnergy, said he expects the company to continue growth through acquisitions.
Mr. Hammett noted that the company has a long-standing investment banking relationship with Lehman Brothers.