Banks Press for Colbun Refi

Colbun, the Chilean electricity generator, is under gentle pressure from lenders to refinance a $320m 5-year term loan raised in 2006 after the borrower ran into trouble and tripped covenants. The deal paid Libor plus 40bp out of the box and bankers in the lending group say discussions will be held in coming weeks to refinance at significantly higher margins, as well as add other features to better insure against default. “It’s not the company’s fault, no one could foresee the problems they ended up having,” says a banker in the group. Colbun experienced several very tough months and reported a loss of $93m in 2007. But the outlook has recently improved slightly with the onset of rain, which has replenished some hydroelectric dams. A long drought and a shortage of natural gas from Argentina last year led Colbun to seek fuel for generation in the diesel market, where prices have skyrocketed. With higher expenses and an inability to adjust sales contracts, Colbun’s leverage ratios soared, causing it to trip bank debt covenants. The company sought waivers twice with its lenders, which were conceded, though the margin on the $320m facility rose to over 75bp, says a banker. The deal is on a leverage grid, paying 35bp for less than 2x and 85bp at or above 4x. MLAs on the deal include ABN AMRO, BBVA, BNP Paribas, Santander, BayerischeLB, Calyon, Citi, ING, JPMorgan and WestLB, according to Dealogic. Seven more came in as participants.