Valvoline US enters into $1.33 billion five-year credit agreement

By Wendy Van Sickle

Columbus, Ohio, July 11 – Valvoline US LLC newly formed finance subsidiary Valvoline Finco One LLC entered into a $1,325,000,000 credit agreement on Monday and Ashland Inc. entered into an amendment to its credit agreement dated June 23, 2015, in connection with a reorganization, according to an 8-K filing with the Securities and Exchange Commission.

Valvoline credit agreement

The agreement provides for a $450 million revolving credit facility with a $100 million letter of credit sublimit and an $875 million term loan A. Each tranche has a five-year term, and both were undrawn at closing, with funding subject to certain conditions including execution of guaranty and security agreements and satisfaction of collateral requirements, among others.

Citigroup Global Markets Inc., Bank of Nova Scotia, BofA Merrill Lynch and Morgan Stanley Senior Funding, Inc. acted as joint lead arrangers and book managers; Deutsche Bank Securities Inc., Goldman Sachs Bank USA, JPMorgan Chase Bank, NA, PNC Capital Markets LLC and U.S. Bank NA as co-arrangers and co-managers: Citibank, NA as syndication agent; and Bank of Nova Scotia is administrative agent.

Borrowings will initially bear interest at Libor plus 237.5 basis points, and the revolver will have an initial unused fee of 37.5 bps. The margin above Libor will fluctuate from 150 bps and 250 bps and the commitment fee from 20 bps to 50 bps, depending on the borrower’s credit rating.

The term loan will amortize at 5% per year in the first two years, 10% in the third and fourth years and 5% per quarter for the first three quarters of the fifth year, with the balance due at maturity.

Proceeds may be used to repay existing Ashland debt, to pay fees and expenses related to the Valvoline credit facilities and for ongoing working capital and general corporate purposes.

Ashland amendment

The amendment modifies the Ashland credit agreement with Bank of Nova Scotia as administrative agent to permit, among other things:

• The merger of Ashland into a subsidiary of Ashland Global Holdings Inc., pursuant to which Ashland Global will become Ashland’s new public parent company;

• A series of transactions after which Valvoline US LLC will own substantially all of the assets constituting the Valvoline business, and Ashland will no longer own the Valvoline business; and

• Borrowings by Valvoline Inc. or one or more finance subsidiaries of Valvoline US LLC of up to $1.25 billion in debt.

Additionally, the amendment provides that once the aggregate principal amount of Valvoline borrowings reaches $750 million, Ashland is required to use the net proceeds from such Valvoline borrowings to repay its existing term loan A loans and/or permanently reduce its existing revolving credit commitments under the credit agreement in an aggregate amount of up to $1 billion.

As previously reported, the split separates Ashland into two independent, publicly traded companies, the new Ashland and Valvoline.

Ten years in the making, it is the final step in Ashland’s transformation from an oil refiner and marketer to a specialty chemicals company.

Ashland is a Covington, Ky.-based specialty chemicals company.

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