Williams raises more cash

US energy company Williams has obtained a five-year, $400 million unsecured credit facility from investment bank Citigroup and has also sold $23 million of further assets from its power division.

The firm, based in Tulsa, Oklahoma, plans to use the new credit facility mainly for issuing letters of credit. It will be an alternative to Williams’ existing$800 million line of credit, which requires cash collateralisation.

“Under the terms of the new $400 million facility, we do not have to cash-collateralise letters of credit that we issue,” says a Williams spokesman. “So $400 million of cash is being freed up by replacing the cash-backed letters of credit issued under the $800 million facility with new letters of credit issued under the new facility with more favourable terms.”

The company says it plans to apply the funds that were previously used for cash collateralisation for general corporate purposes, including future debt repayments. Williams still has full access to the previous facility and the new facility for a total credit capacity of $1.2 billion.

Chief financial officer Don Chappel says: “The successful completion of the new credit facility is the first of two steps in the company’s planned replacement of its credit facilities. These actions are designed to unlock additional cash that can be used to retire a portion of our long-term debt ahead of schedule.”

In addition to the new unsecured line of credit, the company says it is also exploring replacement of the original $800 million cash-collateralised revolver with a more traditional secured revolving credit facility.

Meanwhile, Williams has sold transportation contracts, associated forward purchase and sale agreements and inventory to Houston-based Saracen Energy Partners. Saracen’s aim is to make targeted investments in the energy sector. The agreement also assigns to Saracen – and relieves Williams of – future capacity payments totalling around $16 million.

Williams says it expects the sale to close on July 1. The company has made more than $600 million from the sale, termination or liquidation of contracts and assets since June 2002.

A spokesman says: “We are continuing to look at the sale of our portfolio in part or in whole, including power and natural gas hedges and trading contracts.”