(Adds details of pricing and restructuring)
By Davide Scigliuzzo
NEW YORK, Feb 6 (IFR) - Venezuela’s U.S. oil refiner Citgo Holding restructured and raised the yield on a proposed US$2.5bn financing package following lackluster investor demand, a source familiar with the deal said on Friday.
The company, which plans to use proceeds to pay a dividend to Venezuela’s state-owned oil company PDVSA, also agreed to pledge 100% of its operating company as collateral for the sale, the source said.
Concerns over the outlook for the battered US energy sector and default fears surrounding cash-strapped Venezuela have already forced Citgo to sweeten terms on the deal twice this week.
In the latest revision, the company raised the yield on a US$1.5bn bond offering to 12% area, removed a call option after the first two years, and cut the note’s maturity by six months to five years.
Original price talk on the note was 11.75%, which was wide to initial price indications - or whispers - of high 10% to 11%.
The structure and pricing of the US$1bn loan part of the package was also altered to make the deal more attractive to investors.
The maturity on the senior secured term loan has been reduced to 3.25 years from the originally targeted five years, while pricing is now seen at a spread of 850bp over Libor.
That is wide to revised talk of 825bp over Libor announced on Thursday and to the 800bp announced two weeks ago.
The loan will have a Libor floor of 1% - meaning that the interest paid on the principal would be at least 9.50% at the latest price talk.
New terms on the entire package will require the company to maintain a debt service reserve account worth 12 months of principal and interest payments on the debt, up from six months originally.
Addressing one of the most contentious issues in the original structure, the company also agreed to pledge as collateral 100% of the equity of Citgo Petroleum Corp, its operating company, up from the 49% originally announced.
Mid-stream assets worth US$750m will also be pledged as collateral, as originally planned.
Order books for the bond deal, originally scheduled to close at 12:00pm EST on Friday, will remain open until the same time on Monday.
Deutsche Bank is sole bookrunner on the financing package, while Brazilian investment bank BTG Pactual is joint lead manager on the bond issue. (Reporting by Davide Scigliuzzo; Editing by Jack Doran and Natalie Harrison)