This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Debt Deluge at Anadarko

Updated from 2:25 p.m. EDT

The $24 billion financing package Anadarko Petroleum (APC) scored for this morning's acquisition spree isn't for the faint of heart.

On Friday, the company unveiled plans to purchase Kerr-McGee (KMG) and Western Gas Resources (WGR) in two separate transactions that total $23.3 billion. Currently, Anadarko plans to pay for the acquisitions with a 364-day credit facility provided by its two advisers, UBS and Credit Suisse, and a third party, Citigroup.

Credit market sources say the loan probably will be short-term financing, requiring Anadarko, a $20.5 billion market-cap oil and gas driller based in Woodlands, Texas, to replace it during the next year with syndicated bank debt or bonds, or both. Such a structure isn't unusual for an investment grade company doing a deal of this size.

The company is going to do a number of things to finance the acquisition, a spokeswoman said. Divestitures, debt and equity issuance are possibilities. "But none of it has been decided yet," according to the spokeswoman.

Given the uncertain rate environment, could Anadarko find itself backed into a corner by waiting to refinance?

"The corporate bond market has been struggling lately," notes Edward Marrinan, head of credit strategy at JPMorgan Securities. "Valuations for all risky assets have backed up since the middle of May. The primary market has been offering price concessions to get deals done at the same time that secondary market participants have turned risk averse.

"In general, investors are not as willing to provide the pricing and structure on the terms that the issuers had become accustomed to during the last few years," Marrinan says.

Over the next few months, or course, bond markets could go either way. Although demand remains brisk for investment-grade debt like Anadarko's, it could waver depending on comments from the Federal Reserve meeting next week. If the Fed is dovish and economic indicators point to a soft landing, the bond market is likely to stay strong. But if the Fed continues to signal interest rate hikes, and debt becomes more expensive, Anadarko's $24 billion deal could become a costly one.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs