Unocal to Redeem, Refinance Notes Issued in Takeover Fight

Unocal Corp. said Friday that it will redeem and refinance at substantially lower cost $4.2 billion in notes that it issued earlier this year as part of its efforts to thwart a takeover by Texas oilman T. Boone Pickens Jr.

The refinancing could save the Los Angeles-based oil company about $143 million a year in interest payments.

Last month, Unocal said it would seek to refinance the debt to ease the heavy interest payment burden with which it is saddled.

Unocal said the notes will be redeemed Oct. 21 using a $4.4-billion, seven-year loan being arranged with a banking group headed by Manufacturers Hanover Trust of New York.

Unocal issued the notes to buy back one-third of its shares from stockholders. The notes carried interest rates ranging from 11.375% to 14%, with an average of about 12.5%.

Unocal said there will be “considerable interest savings.”

The company said the refinancing would be pegged slightly above either the London interbank rate or the adjusted rate for U.S. bank certificates of deposit.

Based on those rates Friday, Unocal would be paying about 9% on the refinancing. Each percentage point that Unocal shaves off the interest rate will save it about $41 million per year.

The notes were to mature between 1990 and 1997. For redeeming them early, Unocal will have to pay penalties ranging between 3% and 7% of the securities’ face value.