NRG Energy's financing to fund the proposed acquisition of Texas Genco has been increased by $375 million. Buyside demand compelled leads Morgan Stanley and Citigroup to tack on the additional amount to the seven-year $3.2 billion term loan, pushing it to $3.575 billion. NRG is hoping to use proceeds to replace preferred stock that carries a high interest rate with less expensive bank facilities, bankers say. Officials at Morgan and Citi declined to comment on the transaction.

Jay Mandel, spokesman for NRG Energy in Princeton, says final regulatory approval from the Nuclear Regulatory Commission for the Genco merger has been obtained, but declined to talk about financing related to the tie-up.

In addition to the upsized, $3.575 billion secured term loan, the debt package comprises a $1 billion secured revolver, an identically sized secured synthetic letter of credit, a $3.2 billion senior unsecured note offering and a $500 million issuance of convertible preferred stock. Morgan and Citi are pitching to prospective investors in a roadshow planned for this week.

Pricing on the offering is expected to be about 200 basis points, flexed down from anticipated pricing of 225, one banker says, noting that some terms of the deal are still being hammered out. Pricing on the bank facilities, high-yield debt and equity should be settled by early next week.

Fitch Ratings assigned a BB rating to the bulk of the debt package. Analysts called for comment did not return calls. The acquisition financing also includes about $2 billion of equity that will issued to The Blackstone Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co., and Texas Pacific Group, which acquired the Texas Genco assets about two years ago.