LCDX inches up with equities; Manitowoc holds firm; Ashland narrows down retail timing

By Sara Rosenberg

New York, Aug. 22 - LCDX 10 headed higher on Friday, supported by the rise in the stock market, and Manitowoc Co. Inc.'s term loan B was steady in its second day of trading.

In other news, Ashland Inc. is zeroing in on when the general syndication bank meeting will take place for its proposed billion dollar-plus credit facility, but an exact date is still to be determined.

LCDX gained some ground during an incredibly quiet summer trading session, with the movement attributed to the positive performance in equities, according to a trader.

The index was quoted at 96.90 bid, 97 offered, up from Thursday's levels of 96.60 bid, 96.70 offered, the trader said.

Nasdaq closed up 34.33 points, or 1.44%, Down Jones Industrial Average closed up 197.85 points, or 1.73%, S&P 500 closed up 14.48 points, or 1.13%, and NYSE closed up 59.41 points, or 0.72%.

As for the cash market, levels were described as pretty much unchanged on little to no volume, the trader added.

Manitowoc stays strong

Also in trading, Manitowoc's term loan B held firm during its second day in the secondary market, according to a trader.

The term loan B was quoted at 99¾ bid, par 1/8 offered, unchanged from previous closing levels, the trader said.

The $1.2 billion six-year term loan B, which broke for trading on Thursday, is priced at Libor plus 350 basis points with a step-down to Libor plus 325 bps when leverage is below 2.0 times. The tranche carries a 3% Libor floor and was sold to investors at an original issue discount of 98.

In addition to the term loan B, Manitowoc's $2.925 billion credit facility (Ba2/BB+) also includes a $400 million five-year revolver, a $1.025 billion five-year term loan A and a $300 million 18-month term loan X, with all of these tranches priced at Libor plus 325 bps.

During syndication, the term loan B was downsized from $1.325 billion and the pricing step-down was added, and the term loan A was upsized from $900 million.

JPMorgan, Deutsche Bank, Morgan Stanley and BNP Paribas are the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the administrative agent, Deutsche and Morgan Stanley the syndication agents, and BNP the documentation agent.

Proceeds will be used to help fund the acquisition of Enodis plc for 328 pence per Enodis share, resulting in a transaction valued at about $2.7 billion, including the assumption of Enodis' net debt, which was about $249 million/£125 million as of March 29.

Manitowoc is a Manitowoc, Wis.-based provider of lifting equipment for the construction industry, manufacturer of cold-side equipment for the foodservice industry, and provider of shipbuilding, ship repair and conversion services. Enodis is a Tampa, Fla.-based food and beverage equipment manufacturer.

Ashland floats expected launch timeframe

Ashland is getting closer to setting a firm date for its retails syndication bank meeting as expected timing on the launch has been narrowed down to early-to-mid September from simply September business, according to a market source.

The $1.75 billion senior secured credit facility consists of a $500 million five-year revolver, a $500 million five-year term loan A and a $750 million seven-year term loan B.

The deal is already in its senior managing agents phase, which actually kicked off earlier this month.

When timing came out on the senior managing agents launch in early August, sources placed price talk on the revolver and the term loan A at Libor plus 275 bps.

According to filings with the Securities and Exchange Commission, pricing on the revolver and term loan A will, after six months, be based on a grid, under which the spread could range from Libor plus 200 bps to 325 bps based on leverage.

The filings also said that pricing on the term loan B is expected at Libor plus 325 bps and that the entire credit facility will carry a 3% Libor floor.

The revolver has an initial commitment fee of 50 bps. The commitment fee will be able to range from 30 bps to 50 bps based on the leverage grid.

Under the commitment letter, the term loan A was sized at $600 million and the term loan B was sized at $850 million. However, as was allowed under the letter, the company decided to replace $100 million of the term loan A and $100 million of the term loan B with an accounts receivable securitization facility.

Financial covenants include a maximum leverage ratio and a minimum fixed-charge coverage ratio.

Bank of America and Scotia Capital are the joint lead arrangers and joint bookrunners on the credit facility, with Bank of America the administrative agent.

Proceeds from the credit facility, along with $750 million of senior unsecured notes, will be used to help fund the acquisition of Hercules Inc. for $18.60 per share in cash and 0.093 of a share of Ashland common stock. The total transaction value is about $3.3 billion, including $0.7 billion of net assumed debt.

Ashland anticipates refinancing Hercules' existing bank debt and 6¾% notes in connection with the acquisition.

Upon close, Ashland will have pro forma combined revenue for the 12 months ended March 31 of more than $10 billion, including about $3.5 billion generated outside North America. For the same period, Ashland generated EBITDA of $365 million, excluding certain items, while Hercules reported ongoing EBITDA of $392 million excluding certain items.

Closing is expected to occur by the end of the year, subject to the approval of Hercules' shareholders, the receipt of regulatory approvals and other customary conditions.

At close, debt to EBITDA is estimated to be in the area of 3.2 times to 3.3 times.

Ashland's target is to reduce its leverage to between 1.5 times to 2.0 times EBITDA within two to four years by using excess cash flow, which is important to achieving the company's goal of an investment grade credit rating.

Ashland is a Covington, Ky., chemical company. Hercules is a Wilmington, Del., manufacturer and marketer of specialty chemicals.

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