A term loan B refinancing for a gas-fired project has been launched into syndication as capital begins to flow back into the leveraged loan market.

Bank of America Merrill Lynch, BNP Paribas and Crédit Agricole are the bookrunners on the $530 million package, which will refinance Advanced Power’s 700 MW Carroll County combined-cycle facility in Oregon, Ohio.

The deal had been put on ice as bankers waited for the frosty term loan B market to thaw, PFR reported earlier this month (PFR, 1/8). 

Initial price talk is 375 basis points over Libor, says a project finance banker.

“The bank market for operating assets is printing 275 to 300 over, so there’s definitely a premium for getting your cash out [through a term loan B],” says the banker.

The Carroll County refinancing comprises a $460 million term loan B and a $70 million revolver, both with seven-year maturities.

“A simple explanation for the term loan B market revival: New Year, new money,” says the banker. “There were tremendous outflows at the end of last year but now new money is moving in.”

Total investor returns in the leveraged loan market have been 2.37% year-to-date, according to IHS Markit's iBoxx USD Leveraged Loans index. Average bid prices for loans in the secondary market have been 95.97, up 0.9% since the start of the year. 

Along with the upsizing of Vistra Energy’s $1.3 billion senior unsecured notes—priced at 5.625% and due 2027—on Jan. 22, the Carroll County deal could signal growing momentum in leveraged finance markets for power sector borrowers.

Moody’s Investors Service rated the notes Ba2 on Jan. 25, citing a five-year revenue put with Morgan Stanley, which guarantees a $34 million energy margin floor annually.

The sponsors will use the proceeds to pay down $425 million of the facility’s original construction loan, which BNP and Crédit Agricole arranged in 2015 (PFR, 4/9/15), and pay themselves a $20 million dividend.

Carroll County came online just over a year ago and is located in the AEP zone of PJM Interconnection.

“While the project's [locational marginal pricing] node is slightly different from the AEP Dayton hub and therefore creates some potential for power basis risk, the LMP has historically been clearing at a premium to the AEP Dayton hub,” reads the Moody’s report. “Therefore, if the revenue put is triggered to pay, the project might actually earn a higher gross margin.”

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