EnerSys Refinances, Powers Dividend

Proceeds from EnerSys Capital's new $580 million facility will be used to refinance $219 million of existing debt and pay a $250 million cash dividend to equity holders Morgan Stanley Capital Partners, limited partner co-investors and management. Bank of America is leading the refinancing.

Moody's Investors Service has assigned a B1 rating to EnerSys' five-year, $100 million revolver and seven-year, $360 million first-lien loan. Moody's also assigned a B2 rating to EnerSys' eight-year, $120 million second-lien loan. Standard & Poor's assigned its BB- rating to EnerSys' first-lien facility and a recovery rating of 4, indicating 25-50% recovery of principal in the event of default. S&P also assigned the second-lien facility a B rating and a recovery rating of 5, indicating a 0-25% recovery of principal in the default scenario. Michael Philion, EnerSys' cfo and executive v.p., finance, declined comment.

After acquiring Invensys' Energy Storage Group in 2002, EnerSys has become the world's largest industrial battery company. The company is the largest competitor in both the motive power and reserve power segments. But major end markets, the industrial forklifts and telecom sectors, are cyclical, resulting in some volatility in EnerSys' financial performance, Moody's notes.

The ratings are supported by the company's leading market position and global presence, its successful integration of Invensys' industrial battery business and proactive restructuring initiatives that have lowered the company's cost base, Moody's says. The ratings are inhibited by significant exposure to cyclical end-markets, modest cash flow generating relative to the increase in its debt level and exposure to fluctuations in commodity prices, Moody's adds.