Concho Resources Inc. priced its offering of its senior unsecured notes totaling $1.6 billion, with proceeds to be used for its pending $9.5 billion all-stock merger deal, according to a June 14 news release.
The offering, expected to close July 2, includes $1.0 billion of the company's senior unsecured notes due 2028, issued at 99.66% of par and $600 million of its senior unsecured notes due 2048, issued at 99.74% of par. The 2028 notes will bear an annual interest rate of 4.300%, while the 2048 notes will bear an annual interest rate of 4.850%.
The exploration and production company expects to use proceeds from the offering, as part of the terms of its pending RSP Permian acquisition, to redeem RSP's 6.625% senior notes due 2022 and 5.25% senior notes due 2025 for about $1.2 billion and repay a portion of RSP's outstanding credit facility debt of about $445 million as of March 31. Pending the acquisition terms, Concho plans to use proceeds from the offering in cash, cash equivalents and U.S. government securities.
If the acquisition is not completed on or prior to Dec. 31, or is terminated on or prior to completion, Concho will redeem all of the notes at a price equal to 101% of the principal amount of the notes of the applicable series, plus accrued and unpaid interest to the redemption date.
BofA Merrill Lynch, J.P. Morgan and Wells Fargo Securities will act as joint bookrunning managers for the senior unsecured notes offering.
Moody's recently lifted Concho's rating to investment-grade on the back of the company's efforts to keep a balanced financial philosophy and spend within cash flow while attaining growth.