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SAN ANTONIO -- Tesoro Petroleum Corp. prepaid, on July 1, the remaining $297.5 million principal balance of its 9 percent Senior Subordinated Notes due 2008, at a price of 103 percent pursuant to the indenture. The company will record a pretax charge in the third quarter totaling approximately $16 million related to the prepayment, including $9 million for the related redemption premiums and $7 million for the non-cash write-off of the discount and deferred financing costs related to the notes.
The company had more than $136 million of cash invested and had no cash borrowings on its revolving credit facility after the repayment on July 1.
"As of close of business on July 1, we estimate that our debt to total capitalization ratio should be in the range of 52 percent to 53 percent," said Bruce A. Smith, chairman, president and CEO of Tesoro. "As a result of this prepayment, our future annual pre-tax interest expense will be reduced by about $27 million.
"When we acquired the Golden Eagle refinery a little over two years ago, we clearly stated our intention to de-lever our balance sheet to strengthen our financial profile," he added. "In that short period of time, despite a terrible economic environment in 2002, we have repaid approximately $800 million, or nearly 40 percent of our debt. We believe this performance confirms our expectation that we will continue to generate strong free cash flow, which will enable us to further reduce debt to a level in line with others in our peer group."