Atlantic Richfield said Monday that it plans to accelerate the payment of nearly $1 billion in debt this year with the help of proceeds from the recent sale of such assets as Arco Plaza in downtown Los Angeles.
Coupled with regularly scheduled debt that it will pay off this year, Arco said it expects to trim its long-term debt in 1987 by a total of $1.4 billion, or almost one-fifth. The plans were welcomed by investment analysts concerned about the debt load the company built up in the past few years.
Arco said it plans to redeem a pair of debt issues totaling $550 million that would have fallen due in about 25 years and are costing the company about 13% annual interest. Though the early repayment will trim first-quarter earnings by $35 million, it will save $27 million this year and $45 million annually in later years in after-tax interest savings, Arco said.
An additional $400 million in debt that would fall due in 1990 will be redeemed in May by Atlantic Richfield Overseas Finance, Arco said.
All those actions are expected to cut Arco's long-term debt to about $6.1 billion from the current $7.5 billion, the company said.
Arco's debt and the collapse of crude oil prices in 1986 led Standard & Poor's to reduce the Los Angeles-based energy concern's credit rating last summer. Similar actions were taken for about 50 other oil and gas companies.
"I'm pleased to see something like this. Clearly this is the right direction," said Robert Weiss, assistant vice president in Standard & Poor's energy group. "Whether it will result in a ratings review at this time, I can't say."
Arco executives are to make a presentation today to financial analysts in New York.
Arco incurred much of its debt when it laid out $4.5 billion to repurchase 79 million of its own shares of common stock in 1984 and 1985. Since then, it has cut operating costs, sold oil and gas and other properties and slashed capital spending.
The company says it realized $900 million last year, most of it in cash, from the sale of various holdings. That included $320 million from the sale of its downtown headquarters.