Krotz Springs plans $720 million credit facility for purchase by Alon USA

By Sara Rosenberg

New York, May 8 - Krotz Springs is planning on getting a new $720 million credit facility to help fund its acquisition by Alon USA Energy, Inc., company officials said in a conference call Thursday.

The credit facility, which is non-recourse to Alon, consists of a $245 million first-lien term loan, a $50 million letter-of-credit facility to support substantial hedging and a $425 million ABL revolver.

Debt cost to capital will be in the 9% range, officials said in the call.

There is a 100% cash flow sweep feature under the credit facility.

Credit Suisse is arranging the term loan and letter-of-credit facility, and Wachovia provided the revolver commitment.

The revolver, which has a $75 million accordion feature, will be used to support ongoing working capital needs.

Alon expects that the transaction will generate strong free cash flow that should enable substantial delevering of the debt within three years.

At close, $125 million is expected to be drawn under the revolver. However, these funds are expected to be fully repaid within 60 days, officials added in the call.

Total leverage at Krotz (opco debt) will be 0.9 times.

Alon is buying the Krotz refinery from Valero Energy Corp. for $333 million in cash plus an amount for working capital, including inventories, to be determined at closing. The equity contribution for the deal totals $105 million.

The transaction is expected to close during the latter portion of the second quarter or early in the third quarter, following satisfaction of customary conditions, including regulatory approvals.

Krotz Springs is an 85,000 barrel-per-day refinery located in Louisiana. Alon is a Dallas-based refiner and marketer of petroleum products.

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