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SAN ANTONIO -- Independent refiner Tesoro Petroleum Corp. yesterday said it has amended the terms of its $1.275-billion credit agreement with its lenders, removing some pressure to meet financial obligations for a company hurt by weak refining margins, but it will also be forced to sell additional retail assets.
"Despite extremely difficult market conditions, Tesoro has demonstrated its determined commitment to financial stewardship," said Bruce Smith, chairman and CEO of Tesoro. "The amendment is in part recognition of those efforts, as the financial institutions in the credit agreement overwhelmingly voted to suspend, for the next four quarters, coverage tests that are based on trailing four quarters of EBITDA."
In June, just weeks after closing on a deal to acquire a California refinery and 70 convenience stores from Valero Energy Corp., Tesoro revealed plans to sell off some convenience stores, pipelines and other assets, make significant job cuts, and reduce spending as part of an effort to sharply reduce debt.
The independent refiner said it hopes the effort will allow it to cut its debt load by $500 million by the end of 2003, balancing a string of costly acquisitions that fostered concern on Wall Street over the company's bottom line.
In August, Tesoro reached a deal with Williams Energy Partners L.P. to sell its Northern Great Plains Products System for $110 million.
Yesterday's amendment reflects the poor margins plaguing refiners nationwide. It also limits capital expenditures, which are consistent with the company's previously announced goals, Smith said.
Tesoro operates six refineries with a combined capacity of nearly 560,000 barrels per day. Its retail network includes 750 convenience stores, of which over 290 are company-owned under the Tesoro 2Go and Mirastar brands.