Western Refining Proposes New Senior Secured Term Loan

Western Refining Inc. (NYSE:WNR) has proposed the syndication of new senior secured term loan credit facility. The proposed loan, which is referred to as Term Loan B-2, is estimated to be worth $500 million and will mature in seven years. Also, the new term loan will be placed on the same footing as the existing term loan – Term Loan B-1.

Western Refining intends to use the proceeds from Term Loan B-2 to partially fund its acquisition in Northern Tier Energy LP (NYSE:NTI) . Moreover, the new term loan is expected to close in the same period as the closure of Northern Tier’s acquisition – in late June.

Western Refining, which already had 38% interest in Northern Tier, signed an agreement with the latter last year to purchase the remaining outstanding common units of the partnership. Per the accord, Northern Tier unitholders will get $15 in cash along with 0.2986 share of Western Refining for every unit of the partnership. Once the deal is closed by the first half of 2016, the partnership’s units will no longer be traded publicly and the partnership’s unitholders will gain 15% ownership of Western Refining. Western Refining intends to raise funds for this acquisition using proceeds from the new term loan and balance sheet cash.

The Term Loan B-2 is subject to various customary closing conditions, and consent of lenders under Western Refinery’s existing credit facilities. The terms under which the loan will be extended are subject to changes with no assurance that the loan will actually be extended.

Founded in 2005, El Paso, TX-headquartered Western Refining is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S. Western Refining has a combined crude oil processing capacity of approximately 151,000 Bbl/d.

The company currently carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players in the energy sector are McDermott International Inc. (NYSE:MDR) and Pembina Pipeline Corporation (NYSE:PBA) . Both these stocks sport a Zacks Rank #1 (Strong Buy).