RLPC-Drax forward start loan pays L+350 bps-sources

LONDON, July 14 (Reuters) - British coal-fired power station operator Drax Group's (DRX.L) 235 million pound ($382.3 million) forward start loan pays an initial margin of 350 basis points (bps) over LIBOR, banking sources said on Tuesday.

The pricing represents a significant margin increase from the borrower's previous loan from 2005 which paid 90 bps, according to Thomson Reuters LPC data.

Forward start loans allow borrowers to lock in loans ahead of maturity in return for increased margins and fees.

The financing extends the maturity of an existing term loan and a revolving credit facility when they mature in December 2010.

The forward start is split between a 135 million pounds term loan and a 100 million pounds revolving credit facility.

Pricing on the deal is based on a ratings grid -- for a rating of BBB and above the financing will pay 300 bps, for a rating of BBB- the loan will pay 350 bps and for a rating of BB+ and below or unrated the financing will pay 500 bps.

In May, Standard and Poor's downgraded Drax Finance's senior secured debt rating to BBB- from BBB.

Drax said in June that it would use the proceeds of a 108.2 million pound share placing to reduce a 370 million pound term loan to protect its investment grade rating.

Drax also said that it would refinance the reduced term loan extending the maturity by two years until December 2012, leaving the company's letter of credit and working capital facilities in place.

Drax tapped the European syndicated loan market for a 800 million pounds facility in 2005 via Barclays, Commerzbank and ING.

That deal was split into a five-year 500 million pounds term loan, a seven-year 200 million pound letter of credit facility and a five-year 100 million pound revolving credit facility.

(Reporting by Alasdair Reilly; Editing by David Cowell)