Atlantic Power repriced its $563 million senior secured term loan and $200 million senior secured revolving credit facility at its APLP Holdings subsidiary via a group of arranging banks led by Goldman Sachs Lending Partners.
The repricing became effective October 18, 2017. The interest rate margin on the term loan and revolver was reduced by 75 basis points to LIBOR plus 350 basis points. The LIBOR floor remains at 1.00%. This repricing is the second for these facilities. Since the original financing in April 2016, the spread has been reduced 150 basis points, from LIBOR plus 500 basis points to LIBOR plus 350.
The company is permitted to prepay the term loan in the first six months following this transaction at a 1% premium. Following the six-month period, prepayment is permitted at par. The mandatory 1% annual amortization and cash sweep provisions of the term loan are unchanged.
As a result of this repricing, the company expects to realize interest cost savings in 2018 of approximately $4 million. Cumulative savings through the maturity dates of the term loan (April 2023) and revolver (April 2021) are estimated to be approximately $15 million. The combined savings of both repricing transactions is expected to be approximately $33 million over the terms of the facilities.
Separately, on October 12, 2017, the company repaid the $54.6 billion non-recourse project debt outstanding at its Piedmont plant. This debt was scheduled to mature in August 2018. Annual interest cost savings from repayment of this 8.1% debt are approximately $4.5 million. The company used $59.6 million of discretionary cash and $4.5 million of project-level cash (previously classified as restricted) in repayment of the debt, payment of accrued interest, and interest rate swap breakage costs.
“The additional reduction in the spread on our term loan and revolver and our recent credit rating upgrade by Moody’s all reflect the progress we have made in reducing our leverage, which we expect will continue,” said Terrence Ronan, executive vice president and chief financial officer of Atlantic Power. “Our decision to repay the Piedmont maturity from discretionary cash brings total debt repayment expected in 2017 to approximately $166 million.”
“The progress we have made in reducing debt, interest expense and overheads is providing us increased financial flexibility. The $8.5 million of interest cost savings from the recent repricing of our term loan and revolver and the repayment of Piedmont debt brings the total reduction in interest and overhead expenses achieved from our restructuring efforts over the past several years to nearly $100 million on an annualized basis,” said James J. Moore, president and CEO of Atlantic Power. “We chose to allocate some of our approximately $250 million of liquidity to repayment of the existing project debt at Piedmont, which had been costing us 8%.
Atlantic Power owns and operates 23 power generation assets across nine states in the U.S. and two provinces in Canada.