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March 11 (Bloomberg) -- Western Pipeline, wholly owned by Global Infrastructure Partners, set the rate it will pay on a $500 million term loan, according to a person with knowledge of the transaction.

The seven-year debt will pay interest at 2.75 percentage points to 3 percentage points more than the London interbank offered rate, said the person, who asked not to be identified because the information is private. Libor, a rate banks say they can borrow in dollars from each other, will have a 1 percent floor.

The loan is expected to be sold at 99 cents to 99.5 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.

Lenders will receive one-year soft-call protection of 101 cents, meaning the company would have to pay 1 cent more than face value to refinance the debt during the first year, the person said.

Proceeds will be used to pay a dividend to Global Infrastructure Partners and fund an account for future debt payment, according to data compiled by Bloomberg.

Western Pipeline includes Ruby Western Pipeline Holdings LLC and Ruby Western Pipeline Holdings B LLC, which will be co-borrowers on the credit facility and the loan will be secured by the co-borrowers’ 50 percent equity interest in Ruby Pipeline, the data show.

Ruby Pipeline is a 680 mile natural gas pipeline from Wyoming to Oregon that is owned and operated jointly by Global Infrastructure Partners and Kinder Morgan Inc.

Barclays Plc and Credit Suisse Group AG are arranging the financing and commitments are due by noon on March 22 in New York, according to the person. The debt is rated Ba2 by Moody’s Investors Service and BB+ by Standard & Poor’s.

Jack Cowell, a spokesman for Global Infrastructure Partners, declined to comment.

To contact the reporter on this story: Michael Amato in New York at mamato3@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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