EEB Turns to Locals for Financing

Colombian energy company EEB is in talks to raise $400m in new debt in the local bank market. Astrid Martinez, CEO, says she is discussing with a group of banks raising a 3-year bullet bridge loan at an expected rate of DTF plus 450bp-500bp. She notes that the price will likely be some 50bp higher than what might have been achieved prior to September. In the next 2 years, the company will seek a longer-term takeout, likely with international banks. The new debt will finance 2 large gas pipeline projects in Colombia which require total investment of $600m. The remaining $200m for capex will come from EEB’s own coffers. The new debt will elevate the company’s leverage ratio to 3.12x from 2.28x, says Martinez, keeping the company comfortably within leverage limits. Bond covenants say leverage must remain below 4.50x. EEB had originally sought to raise $400m via an equity issue or the sale of a stake to a strategic partner, but those plans gave way to raising debt in the local market. TGI, the company’s subsidiary gas unit, does not have the capacity to raise more debt, says Martinez. EEB’s debt is comprised primarily of $750m in 2017 9.50% notes (TGI), and $610m in 2014 NC4 8.75% bonds, both issued in the second half of 2007. On Monday, Fitch reduced its outlook on the company’s BB rated debt to negative from stable.