Fresh from a $210 million high-yield bond offering for IMCO Recycling, PNC Bank and J.P. Morgan have jointly underwritten a four-year $120 million asset-based loan for the Irving, Texas-based aluminum and zinc recycler. Proceeds from the bond offering and the new loan will repay existing bank debt and receivables under an accounts receivables securitization facility, explained James Walburg, senior v.p., finance and administration and treasurer. He said syndication of the credit will begin soon, but a bank meeting has not yet been scheduled. One banker said a group of lenders has already been approached, and a formal bank meeting may not be required.
The previous J.P. Morgan-led bank facility was maturing in September of this year, while the securitization facility, led by PNC, was set to mature in November, he said. "IMCO did not want to bump into year-end," but at the same time the company waited until near maturity as it was "enjoying favorable rates under [the] old facility." The notes offering, led by J.P. Morgan, priced at 103/8% and sold at 99.383%. Along with $22 million of the new loan, the bonds will repay $98 million of bank debt, $58 million of debt at non-U.S. subsidiaries and repurchase about $22 million of borrowings under the securitization facility.
Walburg declined to provide details of the previous interest rates and the new bank debt pricing. But he stated that "the notes are clearly at a higher rate." The advantage is that it gives IMCO a better long-term debt capital structure, he responded. The new credit is asset based and is secured by accounts receivables, he said, adding that this moves IMCO to a more traditional ABL deal that better uses the company's collateral. Moody's Investors Service has assigned the company a senior implied rating of B2. Once the refinancing is completed, debt-to-EBITDA is expected to be just over four times, notes the rating agency. A PNC banker declined comment.