Houston-based Apache Corp. priced $3 billion in aggregate principal amount of notes in a public offering to help fund its $2.85 billion purchase of Cordillera Energy Partners III LLC.
The company priced $3 billion in aggregate principal amount of notes in a public offering consisting of $400 million principal amount of 1.75% notes due in 2017, $1.1 billion principal amount of 3.25% notes due in 2022, and $1.5 billion principal amount of 4.75% notes due in 2043. Fitch and S&P have rated the issuance at A-, Moody’s at A3, noted Global Hunter Securities (GHS) in a note to investors April 4.
A large portion of the proceeds is expected to fund the $2.25 billion cash portion of the acquisition. The deal, which boosts Apache’s Anadarko Basin position to 487,000 acres (316,000 in the Granite Wash), was announced in late January and is expected to be completed during the second quarter.
A smaller portion of the funds raised will go towards repayment of Apache's $400 million in aggregate principal amount of 6.25% notes which mature on April 15, 2012, and for general corporate purposes.
“[Apache] is also is likely to use some of the funds to pay off $400MM in 6.25% notes due this year, for a total net debt increase of $2.6B. We had assumed a net $2B with the balance of the Cordillera deal that wasn’t paid in shares to be paid from cash; the higher debt level brings our debt/boe to $3.64, and 2012E debt-to-cap to 25% - still well below the 33% peer median. Given that APA has already raised the dividend 13% this year and has manageable debt levels, we expect any cash flow over and above our assumed $11.2B for the year to go into additional capex (currently set at $9.5B for the year), most likely onshore US in the Permian or mid-continent,” the analysts continued.
Joint book-running managers for the notes are Citigroup, Goldman, Sachs & Co., JP Morgan, BofA Merrill Lynch, BMO Capital Markets, Deutsche Bank Securities, HSBC, Mitsubishi UFJ Securities, Morgan Stanley, RBC Capital Markets, RBS, UBS Investment Bank and Wells Fargo Securities.