Aleris International to sell $1.1 billion of notes in two-part deal

By Paul Deckelman

New York, Dec. 1 - Aleris International Inc. plans to sell $1.1 billion of senior payment-in-kind toggle notes and senior subordinated notes as part of the financing for the Beachwood, Ohio-based metals company's planned leveraged buyout, high yield syndicate sources said Friday.

The company will market the deal to prospective investors on a roadshow slated to begin on Monday, with pricing expected during the week of Dec. 11 via joint bookrunners Deutsche Bank Securities and Goldman Sachs.

The deal will consist of $600 million of eight-year senior PIK toggle notes, which will be non-callable for the first four years after issue, and $500 million of 10-year senior subordinated notes, which will be non-callable for the first five years after issue.

The senior notes are expected to carry a B3 rating from Moody's Investors, while the subs will be rated Caa1. Standard & Poor's rates both tranches at B- .

The coupon on the toggle notes will step up by 75 basis points if the company chooses to pay its interest in kind rather cash.

The bond deal is a part of the financing for the company's LBO by Texas Pacific Group. In addition to the bonds, this includes $1.85 billion of new bank debt via Deutsche - a $750 million asset-backed revolving credit line and a $1.1 billion term loan B tranche.

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