Fairmount Minerals launches $1 billion term loan B to investors

By Sara Rosenberg

New York, Feb. 28 - Fairmount Minerals Ltd. held a conference call at 3 p.m. ET on Monday to launch a proposed $1 billion six-year term loan B, according to a market source.

Barclays, KeyBank, Bank of America Merrill Lynch and PNC are the lead banks on the deal.

The term loan B is being talked at Libor plus 350 basis points to 375 bps with a 1.25% Libor floor and a par offer price, the source said.

There is 101 soft call protection for one year.

Proceeds will be used to fund a $300 million dividend and to repay existing term loan A and term loan B debt that was obtained in connection with the company's buyout by American Securities.

In August 2010, the company got a $150 million term loan A and a $550 million term loan B, with the tranches priced at Libor plus 450 bps with a 1.75% Libor floor, and both were sold at an original issue discount of 981/2. Pricing on the A loan and the B loan includes a step-down to Libor plus 425 bps when leverage is less than 2.75 times and after receipt of June 30 financials.

As a result of 101 soft call protection for one year, the term loan B will be paid down at 101. The term loan A is being repaid at par.

However, lenders under the company's term loan A and $75 million revolver are being offered a 25 bps amendment fee to permit the refinancing and revise covenants.

Under the covenant changes, the interest coverage ratio and capital expenditures requirement will be eliminated, and the leverage ratio will become fixed at 4.75 times throughout the life of the deal, instead of having steps, the source remarked.

When the company came to market last year, its corporate rating was B1/BB- and its facility rating was B1/BB. With this new deal, the corporate rating will stay the same but the facility rating is going to B1/BB-.

At closing of the original deal, the company had $165 million of LTM EBITDA and leverage was about 4.3 times. Now, the company has over $250 million of LTM EBITDA and, pro forma leverage for the dividend, recapitalization will be 4.0 times, the source added.

Commitments are due on March 7.

Fairmount Minerals is a Chardon, Ohio-based producer of industrial sand.

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