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
TheStreet Open House

Debt Deluge at Anadarko

Updated from 2:25 p.m. EDT

The $24 billion financing package Anadarko Petroleum (APC - Get Report) 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 - Get Report) 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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
APC $82.19 0.00%
KMG $26.00 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

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