Frontier Oil Corp. has scored a $175 million credit that will increase to $250 million upon the oil refinery company's $450 million merger with Holly Corp., expected in August. When the line is increased, the eight-bank syndicate will increase to 11 lenders, said Julie Edwards, cfo. "You never want to stretch the banks to the full limit of their capability," she added, explaining why the larger deal will have a wider syndicate. The revolver is led by long-time relationship banks Union Bank of California and BNP Paribas. FleetBoston Financial, Guaranty Bank and Southwest Bank of Texas will be the three new lenders, Edwards noted. "We still believe in the relationship business," she said.
The credit is for working capital purposes and Holly's own credit facility will terminate upon completion of the merger. Cash advances on the revolver are currently allowed up to $125 million, while it will be for up to $200 million upon closing of the merger. The deal is secured by accounts receivable and inventory and is scheduled to mature in June of 2006. The spread ranges from LIBOR plus 11/4-2%, tied to a leverage-based grid. Edwards said the new deal is priced tighter than the previous line. "The old loan was made in a different environment," she said of the market tone during 1999 when the facility was last expanded.