News of a merger with Texas Pacific Group dampened the break of Aleris International's $650 million term loan "B" last Tuesday. A desk analyst said the loan, which backs Aleris' acquisition of a unit of Corus Group, did not trade as high as hoped because it is anticipated the debt will be paid back at par in six months. The term loan, which is split between a $400 million piece and a E250 million tranche and trade separately, broke at 100 1/4-100 1/2. "It didn't trade up much; it can only trade so high because it will be paid back at par," said the analyst.
TPG will acquire all of Aleris' stock for $1.7 billion, plus the assumption of, or repayment of, $1.6 billion of debt. Citigroup is acting as financial advisor to Aleris, while Deutsche Bank is advising the private equity firm.
The merger comes just a month after the launch of the financing for Aleris' E700 million purchase of Corus' downstream aluminum business (CIN, 7/17). Deutsche Bank and Citi lead the financing, which includes a $750 million asset-backed revolver. Pricing is LIBOR plus 2 1/2% on the U.S. portion of the term loan and LIBOR plus 2 3/4% on the euro tranche.
Moody's Investors Service placed the ratings on Aleris' credit facility on review for possible downgrade after the merger announcement. Calls to Michael Friday, cfo, were not returned.