R3 Treatment reworks facility, splitting term loan into two tranches

By Sara Rosenberg

New York, May 27 - R3 Treatment Inc. revised the structure of its credit facility, dividing the term loan into two tranches and increasing price talk, according to a market source.

The facility now consists of a $40 million 41/2-year term loan A talked at Libor plus 600 basis points and an $85 million five-year term loan B talked at Libor plus 650 bps, the source said. Both tranches include a 2% Libor floor and are being offered at an original issue discount of 99.

The term loan B has hard call protection of 102 in year one and 101 in year two.

Initially, the deal was going to include a single $125 million five-year term loan that was talked at Libor plus 500 bps with a 2% Libor floor.

As before, the $165 million credit facility also includes a $40 million four-year revolver that is still talked at Libor plus 450 bps with a 100 bps commitment fee and a 2% Libor floor.

UBS and Macquarie are the joint bookrunners and lead arrangers on the deal, with UBS the left lead, and Comerica is acting as a lead arranger as well.

Amortization on the term loan A is $7.5 million in year one and year two, $10 million in year three and year four and $5 million in the last half a year, while amortization on the term loan B is 1% annually.

There is a $40 million accordion feature, subject to a Most Favored Nation clause and leverage test.

Financial covenants include a maximum leverage ratio of 3.75 times, stepping down to 3.5 times in January 2012 and 3.25 times in January 2013, and a minimum fixed-charge coverage ratio of 1.1 times.

Commitments are due from lenders on June 1 and closing is targeted for June 15.

Proceeds from the credit facility will be used for acquisitions, as four companies are being rolled up to create R3 Treatment, an independent provider of environmentally conscious waste services for energy and industrial wastes.

On a consolidated basis in 2009, R3 Treatment generated pro forma revenue of $94.9 million, EBITDA of $48.7 million and EBITDA margins of 51.3%.

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