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RLPC-Centrica in loan talks for British Energy purchase

Wed, Nov 5 2008, 17:46 GMT
http://www.afxnews.com

By Alasdair Reilly

LONDON, Nov 5 (Reuters) - British Gas-owner Centrica is in talks with its banks over a new syndicated loan to part-finance its potential acquisition of a 25 percent stake in British Energy, banking sources said on Wednesday.

The loan will supplement the company's 2.2 billion pounds ($3.48 billion) rights issue which was announced last week, sources said.

"Centrica is talking to banks about a new loan in addition to equity for the acquisition financing," a head of loan syndications said.

Centrica's decision to raise the majority of the acquisition price with a rights issue highlights the problems that even the most highly rated companies are having raising debt in the frozen loan and bond markets.

The level of dislocation in the syndicated loan market, as unsold loans clog arranging banks' balance sheets and amid the continued closure of the bond market, is forcing investment grade companies to seek funding alternatives.

"Even large companies like Centrica are finding issuing new shares a more accessible source of funding than the loan market right now," a senior banker said.

Bankers do not see recent equity market volatility as a problem for A/A3 rated Centrica in terms of investors subscribing to the new shares.

"I'm sure some special shareholders will be ready to increase their investment and help Centrica out with the situation," the source said.

Centrica's rights issue has been underwritten by Goldman Sachs International, Credit Suisse Securities and UBS as joint bookrunners and by Barclays, BNP Paribas HSBC and RBS as lead managers.

The company said last week that it would also consider asset sales to fund the acquisition in addition to debt and the rights issue.

(Additional reporting by Tessa Walsh; editing by Simon Jessop) ($1=.6325 Pound) Keywords: CENTRICA/LOAN

(alasdair.reilly@thomsonreuters.com; +44 20 7542 3197; Reuters Messaging: alasdair.reilly.reuters.com@reuters.net)

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