New-era deals, terms and pricing

Last week saw the launch of the US$970m (€662m) debt package supporting Dubai International Capital‘s acquisition of Almatis and the €900m facility backing Oakhill’s acquisition of Firth Rixson.

In contrast to transactions arranged prior to the summer’s credit crunch, both deals were agreed in the second half of the year and include features designed to maximise the appeal to bank and institutional investors.

Despite the torpid state of the European marketplace, there is still demand for well-structured non-legacy credits: both of these deals have investor-friendly features including amortising tranches, large equity contributions, blended margins of more than 300bp and significant mezzanine tranches offered with call protection.

Last week arrangers launched syndication of the €900m of facilities backing Oakhill’s acquisition of Firth Rixson. Lehman Brothers is bookrunner across both the €650m senior and €250m mezzanine debt; GE Commercial Finance is joint bookrunner on the senior piece; and Lloyds TSB is MLA on the mezzanine tranche.

The deal is the largest new buyout mandated since the credit crunch in July.

Senior facilities consist of a £50m seven-year revolver paying 250bp over Libor, a £125m seven-year term loan A paying 250bp, a £137.5m eight-year bullet term loan B at 300bp and a £137.5m nine-year bullet term loan C at 350bp.

In addition there is a £175m 10-year bullet mezzanine facility paying 450bp cash and 450bp PIK. The mezzanine tranche is non-call one then 102, 101 and par.

Senior debt is 3.9x and total debt is 5.6x estimated Ebitda to December 2007. A £35m ticket paying 75bp is offered for a JLA title while lead arrangers are invited on a £20m ticket for a 60bp fee.

Syndication is targeted primarily at existing bank and institutional lenders. A bank meeting will be held in London on November 20 with commitments due on December 3.

Oakhill is buying out Firth Rixson from Carlyle Group and Lehman Brothers Co-Investment Partners for approximately £945m. The sponsor’s equity contribution is approximately 40%.

Firth Rixson supplies specialised metal and engineered products to the aerospace industry: the UK-headquartered business has extensive US operations.

Also launched last week was the US$970m debt package backing the acquisition of Almatis by Dubai International Capital (DIC) from Rhone Capital and Ontario Teacher’s Pension Plan Board.

UBS is mandated as global coordinator, MLA and bookrunner across all of the debt, with Arab Banking Corporation as MLA and bookrunner on the senior secured facilities.

Dollar equivalent senior facilities include a US$200m seven-year term loan A paying 250bp over Libor, a US$205m eight-year term loan B at 300bp, a US$205m nine-year term loan C at 350bp, a nine-and-a-half-year US$75m second lien facility paying 600bp, and a US$50m seven-year revolver paying 250bp.

The financing also includes US$235m equivalent of mezzanine and junior mezzanine loans.

A broad syndication strategy will seek to attract funds, including CLOs, and banks. The deal was recapped earlier this year and has an existing bank group. The sponsor has a track record of buyouts in Europe.

DIC is contributing approximately 26% equity and, in contrast to typical secondary buyouts, the new structure actually sees Almatis de-leveraged.

Under the terms now in the market Almatis is expected to have pro forma senior leverage of approximately 4.3x Ebitda and pro forma total cash pay leverage of around 6x.

In contrast, when the group was recapitalised earlier this year, the deal was sold at 5.1x through the senior secured, 5.9x through the second lien and 6.6x through the PIK.

Germany-based Almatis produces specialty alumina products for industry.