Gross debt will be reduced by $1 billion and annual cash interest expense by $51 million
Marathon Oil Corporation has entered into a deal in order to redeem at par the outstanding $1 billion of 5.125 percent municipal revenue bonds due in 2037. Gross debt will be reduced by $1 billion and annual cash interest expense by $51 million, as a result of this transaction, while at the same time, preserving the ability to remarket up to $1 billion of the tax-exempt municipal bonds to third parties between closing and the maturity date of 2037.
Marathon Oil’s gross debt has been reduced by an estimated $1.75 billion, and annual cash interest expense has been reduced by approximately $115 million, when combined with the Company’s previous refinancing transaction in third quarter 2017.
With cash on hand, Marathon Oil has agreed to purchase, $1 billion of Revenue Refunding Bonds (Marathon Oil Corporation Project) Series 2017 having a term rate of 3.75 percent that will mature on June 1, 2037 to be issued by the Parish of St. John the Baptist, State of Louisiana. $1 billion of 5.125 percent Fixed Rate Revenue Bonds (Marathon Oil Corporation Project) Series 2007A will be redeemed by the Parish using the proceeds for which the Company is currently the obligor. A reduction of total gross debt of $1 billion and generation of annual cash interest savings of $51 million will be the result of the purchase of the refunding bonds by the Company and the redemption of the original bonds.
“We continue to strengthen our balance sheet, and this transaction takes advantage of a unique element of our capital structure to reduce gross debt while preserving future optionality in the tax-exempt bond market,” said Dane Whitehead, Marathon Oil executive vice president and CFO. “Importantly, it also lowers our annualized corporate costs by another $50 million.”
As of Sept. 30 was $5.2 billion, the Company’s total liquidity consisted of $1.8 billion in cash and cash equivalents and an undrawn revolving credit facility of $3.4 billion. The sale of the company's Canadian subsidiary,slated to be received in first quarter 2018, will fetch nearly $750 million in remaining proceeds. PWKD01122017