Rexnord inks commitment for up to $708M term loan, $198M revolver

Rexnord Corp. disclosed that on Feb. 14 it entered into a commitment letter with Credit Suisse providing an up to $708 million, seven-year covenant-lite term loan and an up to $198 million, five-year revolver. Proceeds of the loans, together with proceeds from a dividend and balance sheet cash, will be used to redeem or prepay in full all obligations currently outstanding under an existing credit agreement and the company's 4.875% senior unsecured notes due 2025, to pay fees and expenses and for general corporate purposes.

Pricing is outlined on the term loan and revolver at L+200, with a 0% Libor floor, with a net first-lien leverage-based step-down of a 25 basis points on the revolver.

As reported, Rexnord has agreed to sell its process and motion control business to Regal Beloit Corp., which has obtained a commitment letter from Barclays providing a $2.126 billion, 364-day bridge loan in connection with that acquisition.

Land Newco, a wholly owned subsidiary of Rexnord, meanwhile, has also entered into a commitment letter with Barclays, providing a roughly $486.8 million, 364-day bridge loan facility. Proceeds from the bridge loan are earmarked to pay the dividend related to the transaction.

Pricing is tied to a leverage-based grid, at L+112.5-175, increasing 25 basis points every 90 days to a cap of L+187.5-250. However, pricing can also be tied to a ratings-based grid, at L+112.5-200, increasing 25 basis points every 90 days, to a cap of L+187.5-275. The bridge loan also includes a ticking fee of 0.15% and a duration fee of 50 bps that is payable 90 days after closing, with an additional 75 bps payable after 180 days and a further 100 bps payable at 270 days.

The bridge is covered by a maximum funded leverage ratio set at 4x and a minimum interest coverage ratio set at 3x. These are essentially the same pricing and terms outlined for Regal Beloit's bridge loan.

Rexnord plans to separate its process and motion control unit by way of a tax-free spinoff to Rexnord shareholders and then immediately combine it with Regal in a Reverse Morris Trust transaction. Credit Suisse is providing Rexnord with committed financing for the transaction. According to an investor presentation, pro forma 2021 net leverage is expected to be around 1.1x.

Regal Beloit designs, manufactures and sells electric motors, electrical motion controls, and power generation and transmission products.