Arconic talks $900 million seven-year secured notes to yield 8¼%-8½%; pricing Thursday

By Paul A. Harris

Portland, Ore., July 26 – Arsenal AIC Parent LLC provided updated details in the debt financing backing the buyout of Arconic Corp., market sources said on Wednesday.

The deal features a $900 million tranche of seven-year senior secured notes (Ba3/B+/BB+) talked to yield 8¼% to 8½%, well inside of the 8¾% to 9% early guidance.

Books are scheduled to close at 5 p.m. ET on Wednesday, and the secured notes are scheduled to price on Thursday.

Late Tuesday, the secured notes – with pricing discussions still taking place in the context of 8¾% to 9% – were heard to be playing to $4.25 billion of demand.

The Rule 144A and Regulation S for life notes have their first call after three years at par plus 50% of the coupon.

The bond portion of the financing also includes senior unsecured notes, which are downsized to $500 million from $725 million, with proceeds shifted to the concurrent term loan B, resulting in an upsize to the loan to $1.225 billion from $1 billion.

The unsecured notes are all being taken down by sponsor Apollo Global Management. Initial guidance on the unsecured notes has them pricing 300 basis points to 350 bps behind the secured notes. There were no updates on that pricing on Wednesday morning.

Wells Fargo Securities LLC is the left bookrunner. J.P. Morgan Securities LLC, Apollo Global Securities LLC, BMO Capital Markets Corp., Mizuho Securities USA Inc., TD Securities (USA) LLC, Citigroup Global Markets Inc.; Citizens Capital Markets Inc., Fifth Third Securities Inc., Standard Chartered Bank and Truist Securities Inc. are the joint bookrunners for the secured notes.

Proceeds from the secured and unsecured notes, and the term loan, plus $2.3 billion of common equity, will be used to fund the acquisition of Arconic, a Pittsburgh-based provider of aluminum architectural products, by Apollo Global Management and Irenic.

The acquisition, which has an enterprise value of approximately $5.2 billion, is expected to close during the second half of this year.

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