Tenneco shifts funds between term loans, revises B loan pricing

By Sara Rosenberg

New York, June 18 – Tenneco Inc. downsized its seven-year term loan B to $1.7 billion from $1.8 billion and upsized its term loan A to $1.7 billion from $1.6 billion, according to a market source.

In addition, pricing on the term loan B was increased to Libor plus 275 basis points from talk in the range of Libor plus 225 bps to 250 bps, a 25 bps step-up was added if corporate ratings are lower than Ba3/BB- and the original issue discount widened to 99 from 99.5, the source said.

The term loan B still has a 0% Libor floor and 101 soft call protection for six months.

The company’s $4.9 billion of credit facilities (Ba2/BB/BB+) also include a $1.5 billion revolver.

J.P. Morgan Securities LLC and Barclays are the lead banks on the deal.

Proceeds will be used to help fund the acquisition of Federal-Mogul and refinance existing senior credit facilities at both companies.

Under the agreement, Federal-Mogul is being bought from Icahn Enterprises LP for $5.4 billion through a combination of $800 million in cash, 5.7 million shares of Tenneco class A common stock, 23.8 million shares of non-voting class B common stock and the assumption of debt. Tenneco can reduce the number of shares of class B non-voting common stock by up to 7.3 million shares and increase the cash consideration proportionately at the closing.

Pro forma net debt-to-adjusted EBITDA at closing will be about 3 times. The company is targeting a net debt-to-adjusted EBITDA ratio of around 2.5 times by the end of 2019.

Tenneco intends to separate the combined businesses into two independent, publicly traded companies through a tax-free spinoff to shareholders that will establish an aftermarket & ride performance company and a powertrain technology company.

Closing on the Federal-Mogul acquisition is expected in the second half of 2018, subject to regulatory and shareholder approvals and other customary conditions. The separation is expected to occur in the second half of 2019.

Tenneco is a Lake Forest, Ill.-based designer, manufacturer and marketer of ride performance and clean air products and systems for automotive and commercial vehicle original equipment markets and the aftermarket. Federal-Mogul is a Southfield, Mich.-based supplier to original equipment manufacturers and the aftermarket.

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