April 26, 2017 / 3:25 PM / 5 months ago

LPC-Element’s Exova buy backed by $1.5 billion financing

LONDON (Reuters) - UK-based Element Materials Technology’s acquisition of listed British laboratory-based testing firm Exova Group EXO.L will be backed with a US$1.5 billion (1.17 billion pounds)-equivalent financing underwritten by four banks, according to documents.

Exova announced on April 19 that Bridgepoint-owned Element would buy it in a deal valued at £620.3m, partly financed through equity and shareholder debt, underwritten by Bridgepoint’s pan-European fund BEV, as well as the debt financing.

The financing comprises a US$1.285bn-equivalent first-lien loan and a US$230m, eight-year second-lien loan. There is also US$50m of follow-on-funding in the form of unsecured notes.

The first lien-loan comprises a US$720m seven-year term loan B; £160m seven-year TLB; €204.2m seven-year TLB; US$100m six-year revolving credit facility; and a US$50m seven-year capital expenditure facility.

The dollar and euro term loans are guided to pay 350bp over Libor/Euribor if leverage is greater than 4.5 times; stepping down to 325bp over Libor/Euribor for leverage between 4.5 times-4.0 times and 300bp over Libor/Euribor when leverage falls below 4.0 times.

The sterling TLB is offered at 450bp over Libor if leverage is greater than 4.5 times; stepping down to 425bp between 4.5 times-4.0 times and 400bp over Libor, if leverage is less than 4.0 times.

The revolving credit pays 325bp over base rate and the capex 350bp over base rate. Both step down by 25bp based on the same leveraged gradient as the first-lien. The second-lien is set to pay 750bp over Libor. The unsecured notes pay 12%.

HSBC, Bank of America Merrill Lynch, ING and Barclays have arranged and fully underwritten the facility.

The facility will be syndicated to investors shortly, banking sources said.

Element last tapped the loan market in October 2016 when it repriced its US$225m dollar-denominated TLB and US$210m-equivalent euro-denominated TLB. Both tranches priced at 475bp over Libor/Euribor, with a 0% floor and a lender fee of 12.5bp.

It also raised a further US$95m for capital expenditure, in addition to its existing US$70m capex facility.

Element said it would pay Exova shareholders 240 pence per share in cash, representing a 10.7% premium to the stock’s closing price on March 24 before Exova entered talks with potential buyers.

Element specialises in materials and product testing for the aerospace, oil and gas and transportation sectors.

Editing by Christopher Mangham

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