Texas Competitive Electric $300 million secured issue to price Friday

By Paul Deckelman

New York, Oct. 14 - Texas Competitive Electric Holdings Co. LLC and TCEH Finance, Inc. shopped a $300 million offering of 101/2-year senior secured second-lien notes around to potential investors on Thursday. High=yield syndicate sources said that the quick-to-market deal had not priced by late Thursday and would likely instead price on Friday morning.

The issuers are both subsidiaries of Energy Future Holdings Corp., the Dallas-based power generation and electric utility company formerly known as TXU Corp.

The bonds will come to market via Citigroup Global Markets, Inc., the left-hand lead joint-bookrunner on the deal; other bookrunners are J.P. Morgan Securities LLC, Goldman Sachs & Co. and Credit Suisse Securities (USA) LLC.

The bonds will be sold under Rule 144A and Regulation S, with registration rights. They will have five years of call protection and are expected to carry a Caa2 rating from Moody's Investors Service, a CCC rating from Standard & Poors and a B rating from Fitch.

Price talk on the deal indicated a 15% coupon for the issue, pricing at par. Such a coupon, with a projected maturity in April 2021, would be in line with the $335.905 million of 15% senior secured second-lien notes due April 1, 2021, which the company recently issued in connection with a below-par exchange offer, concluded earlier this month, that took out roughly $478 million of its two series of outstanding 10¼% notes due 2015 and its outstanding 10½%/11¼% senior toggle notes due 2016. The new bonds would have indenture covenants substantially similar to those of the earlier 15% issue.

In announcing the new deal on Thursday, Texas Competitive said it plans to use the net proceeds from the bond offering to repay borrowings under its senior credit facility and/or to buy back some more of those outstanding 2015 and 2016 bonds.

A spokesperson for Texas Competitive, when asked by Prospect News on Thursday whether the company also plans any other financing to generate additional proceeds for this purpose, such as new bank debt, declined comment on the company's future financing plans.

She said only that Texas Competitive "has been doing similar exchanges," including the aforementioned recently concluded bond swap, "and doing different things to try and de-lever and to extend out maturities."

The new bonds are to be guaranteed by Texas Competitive parent EFCH and by each of its own subsidiaries that guarantees its senior secured credit facility. They will be secured by second-priority liens on substantially all of tangible and intangible assets of Texas Competitive and the subsidiary guarantors of the credit facility.

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