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Energy Finance Update
August 30, 2007
Energy Risk "Deal of the Year" Signals New Opportunities for Energy Industry Credit Solutions
Innovative deal encourages growth, balances lender/borrower needs and manages risk
Energy Risk, one of the world’s leading energy-industry journals, recently honored Bracewell & Giuliani LLP client, Société Générale Corporate and Investment Banking (SG CIB), with the magazine’s 2007 “Deal of the Year” award for the investment bank's innovative deal with MXenergy. Structured and negotiated by lead Bracewell attorneys, Robin Miles and Christopher Olive, the deal offers a roadmap to borrowers and lenders industry-wide that are seeking to create and implement flexible commodity supply and hedging credit solutions.
Highlights of the SG CIB/MXenergy Deal
- Enables MXenergy to take advantage of growth and acquisition opportunities in recently deregulated markets.
- Unwinds MXenergy’s existing hedge facility and transfers existing positions to SG CIB, freeing MXenergy from margining and counterparty constraints.
- Helps maintain liquidity through a SG CIB hedge facility that ensures price transparency and allows for flexible use of physical suppliers.
- Enhances MXenergy’s bond ratings by creating a structure that does not conflict with collateral pledged for its secured-debt facility.
- Creates a unique open-credit line based on aggregate customer volumes rather than traditional value-at-risk calculations.
- Is flexible, scalable, and shares both the risks and rewards of the deal between SG CIB and MXenergy.
- Helps cement the ongoing, cooperative relationship between both parties.
Elements of an Award-Winning Deal
For MXenergy, speed was of the essence. To take full advantage of market opportunities, the company needed to close the credit deal quickly.
Bracewell and SG CIB stepped up to the challenge. From beginning to end, the transaction was initiated, negotiated and completed within three months. Similarly, the SG CIB/MXenergy deal highlights the importance of harnessing the skills of multidisciplinary teams in the service of common objectives.
According to co-lead attorney Robin Miles, “In developing this comprehensive, creative deal, we took full advantage of the legal and business knowledge of Bracewell’s energy, commodities-trading, finance and asset-valuation attorneys. We also worked closely with Société Générale’s energy-trading team and its traditional lending and credit operations to help them seamlessly work with the customer to achieve a structure that is attractive for both the commodity desk and the syndicated loan market.”
The deal with SG CIB also drew high praise from MXenergy chief executive Jeffrey Mayer, who said, “Working with Société Générale’s energy trading team has been a delight… [it is] professional, knowledgeable, innovative and has a can-do, problem-solving mentality. We look forward to expanding our relationship with them.”