MarkWest to use bridge loan for Javelina purchase, plans bonds, loan, equity for long-term financing

By Sara Rosenberg

New York, Sept. 19 - MarkWest Energy Partners LP will initially fund its acquisition of the Javelina gas processing and fractionation facility in Corpus Christi, Texas, using proceeds from a $500 million one-year bridge loan, but plans on refinancing that debt with a combination of equity, high-yield bonds and new bank debt in the first-half of 2006, a company spokesman told Prospect News on Monday.

The bridge loan consists of a $100 million revolver and a $400 million term loan. Royal Bank of Canada provided the loan commitment.

"It may be syndicated amongst our current bank group but it's a short-term deal," the spokesman said, explaining that at this time, the bridge loan is not expected to be syndicated to the broad market.

In the first half of 2006, the company plans to issue equity and long-term debt to refinance the bridge loan borrowings.

The long-term debt is currently expected to be a combination of high-yield bonds and bank debt, with the bigger piece being bonds, the spokesman said.

With the refinancing, MarkWest's goal will be to maintain a debt-to-total capital ratio of less than 50%.

On Monday, MarkWest announced it has signed purchase and sale agreements with El Paso Corp., Kerr-McGee Corp. and Valero Energy Corp. to acquire 100% of the interests in Javelina for about $355 million.

Kerr-McGee will receive about $142 million for its interests in Javelina and plans to use the net after-tax cash proceeds of about $100 million to reduce debt, according to a Kerr-McGee news release.

El Paso will also receive about $142 million for its interests in Javelina and expects net after-tax cash proceeds of about $100 million. This transaction supports El Paso's plan to reduce debt, net of cash, to about $15 billion by year-end, according to an El Paso release.

The transaction is anticipated to close in the fourth quarter.

MarkWest Energy Partners is an Englewood, Colo., publicly traded master limited partnership involved in natural gas and crude oil.

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