Heubach Group finalizes pricing on $610M term loan for M&A, allocations today

A BofA Securities-led arranger group has finalized terms of the $610 million term loan B that will finance the acquisition of Clariant's pigments business by The Heubach Group and SK Capital Partners, according to sources. Investors are told to expect allocations today.

Pricing for the seven-year TLB is tied to a secured overnight financing rate plus a credit spread adjustment, or CSA, with a 50-basis-points floor. The margin is set at 500 bps, and the original issue discount is 99. The CSA is 10 bps for the one-month tenor; 15 bps for the three-month tenor; and 25 bps for the six-month tenor. Lenders are offered six months of 101 soft call protection.

Initial price talk was for a spread in the range of 475-500 bps, for both Libor and Sofr plus CSA, with a 0.5% floor and a 99 OID.

Additional joint lead arrangers are Citi, HSBC, KeyBanc Capital Markets, MUFG, Citizens and ING Capital Markets.

S&P Global Ratings has assigned preliminary issuer and issue-level ratings of B, with a stable outlook, and a 3 recovery rating to the loan. Moody's assigned corporate and facility ratings of B2, with a stable outlook. Luxembourg Investment Company 428 SARL is the issuer.

Financing for the issuer also includes a $125 million, five-year revolver with a springing net leverage covenant.

On June 14, Heubach announced that it was acquiring the pigments business of Clariant AG in partnership with SK Capital in a deal valuing the business at CHF805 million. There is a potential earnout payment of CHF50 million that is contingent on the 2021 financial performance of the unit. Consideration represents a multiple of 10.7x (or 11.4x including the earnout) the stand-alone adjusted EBITDA for the 12 months ended April 2021, Clariant noted at the time the acquisition was announced. Clariant is reinvesting as part of the deal for a minority stake in the combined business, which will operate under the Heubach name and is expected to generate more than $1.2 billion in annual sales. Closing of the acquisition is expected in the first half of 2022.

Germany-based Heubach GmbH is a global producer of organic, inorganic and nontoxic anticorrosive pigments. The Clariant pigments business provides organic pigments, pigment preparations and dyes, operating 13 global production sites.