Historic Loan Issued to California Oil Production & Shipping Firm
One of the largest West Coast loans ever granted in history was announced in early August by California Resources Corporation, an exploration and production company that operated in the lucrative energy sector of the United States.
California Resources operates exclusively in the Golden State and employs a workforce of about 4,000 employees. The loan recently obtained by the company is priced at one billion dollars, one of the most lucrative loans awarded in the history of California.
The loan granted to California Resources comes from a syndicated bank facility, which means that various lenders came together under an arranging entity to provide funds. In this case, investment banking firm Goldman Sachs was the arranger.
Details of this significant loan include a five-year repayment term, a rate of interest based on the LIBOR plus 10.375 percent as the ceiling and one percent as the floor.
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A Positive Response by Shareholders
According to reports published by various financial news outlets, news of the loan have been received positively by investors and shareholders. Shares of California Resources, which trades as CRC on the New York Stock Exchange, increased by 33 percent just a couple of days after the loan transaction was announced.
This substantial loan could not come at a better time. Like other companies in the oil sector, CRC has experienced its share of difficulties in the wake of falling oil prices. CRC used to be part of Occidental Petroleum Corporation, which divested some of its holdings in late 2014.
CRC has an existing credit facility of about $6 billion; that facility also operates in syndicated fashion and had proven to be a repayment challenge for the company. Market conditions have transformed the existing credit facility into a debt estimated to be at least 10 times larger than its original amount. The most recent syndicated bank facility will serve to repay some of the most pressing debt that CRC has been struggling with in recent months.
A Sizable Loan Collateral
The collateral pledged for the latest syndicated facility is considerable: CRC’s oil pipeline network and its electricity production facilities are on the line. The syndicated loan is in a first lien position.
To get an idea of the assets that are being pledged as collateral for this massive loan, it helps to note that the company has production assets in the four major California basins where oil and gas exploration has taken place over several decades: Los Angeles, Sacramento, San Joaquin, and Ventura.
Despite its financial challenges, CRC is still the largest producer of oil and natural gas in the Golden State. The company is known to explore the potential of oil and gas in California reservoirs that have been ignored by competing firms.
The main product offered by CRC is crude oil, which is sold to California refineries. The Golden State is known to be a region of high demand for gasoline and other oil derivatives. Natural gas has played a major role in the financial development of CRC; in fact, the company operates a power plant that generates electricity from natural gas.