It’s a gas

27 February 2012 By Christopher Swann

The buyout firm and its partners are writing a chunky 40 pct equity check for El Paso’s E&P business. With energy prices volatile, lenders are rightly cautious. But without the usual debt juice, the best hope of a punchy investment return is a big upturn in gas prices.

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A consortium led by private equity firms Apollo Global Management and Riverstone Holdings on Feb. 24 announced a $7.15 billion deal to buy El Paso’s oil and gas exploration and production business in the largest leveraged buyout deal of the year so far.

The buyer group includes billionaire Len Blavatnik’s Access Industries and other parties, El Paso said in a statement.

The sale of El Paso’s EP Energy unit was contemplated in Kinder Morgan’s $21 billion deal to buy El Paso, announced late last year. Kinder Morgan is mainly interested in El Paso’s pipeline assets. The EP Energy sale is conditioned on the completion of the Kinder Morgan-El Paso transaction.

Last year’s second-largest leveraged buyout came from the energy space, as a consortium led by private equity firm KKR paid $7.2 billion for privately held oil and gas group Samson Investment.

The private equity firms said the equity check for the deal would be $3 billion. They have secured credit of $5.5 billion, but only expect to draw around $4.5 billion.

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