Tronox plans $600 million of bonds for alkali chemicals acquisition

New York, Feb. 5 – Tronox Ltd. plans to issue $600 million of new notes in a Rule 144A or other private offering to help fund its acquisition of FMC Corp.’s alkali chemicals business, according to an 8-K filing with the Securities and Exchange Commission.

The company has a commitment for a bridge loan to fund the transaction from UBS Investment Bank, Credit Suisse and RBC Capital Markets, the filing said.

To replace the bridge facility, Tronox may issue the notes. If the bridge loan is not repaid by its mature date of 12 months after the closing of the acquisition it will automatically convert into a senior unsecured term loan “on terms likely to be significantly less favorable,” according to the filing.

Interest on the bridge loan will be Libor plus 625 basis points unless Tronox fails to receive a public debt rating by Standard & Poor’s of BB- or higher and from Moody’s Investor Service of B2 or higher, in which case the rate will be Libor plus 650 bps.

The borrowing cost will step up by 50 basis points 90 days after closing of the acquisition and an additional 50 bps for each additional 90 days.

Tronox will use $1 billion of its cash for the remainder of the $1.64 billion purchase price of the alkali chemicals business.

As announced on Wednesday, Tronox said the financing structure will preserve its liquidity, giving it a capital structure that will provide flexibility to continue its “disciplined approach to pursuing our strategic growth initiatives.”

Tronox said that it places “a high value on maintaining its existing credit ratings” and anticipates that the combined company will be able to reduce its net leverage ratio to less than 4.0 times in 12 to 15 months.

Following closing the company will have $200 million of cash on its balance sheet and undrawn capacity on its revolving credit facilities to meet the needs of its business.

Tronox said it will “continue to be fiscally prudent in evaluating future opportunities” and will be focused on maintaining and improving its existing credit ratings.

FMC’s alkali chemicals business is the largest producer of natural soda ash, accounting for 25% of global production.

Tronox is a Stamford, Conn. producer of mineral sands, titanium dioxide pigment and electrolytic products.

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