HG bonds: PPG Industries places $700M of notes amid M&A growth push; terms

PPG Industries Inc. today completed a $700 million public offering of 1.2% five-year senior notes due March 15, 2026, at T+60, or firm to guidance in the T+65 area, and through early whispers at T+85-90.

The Pittsburgh, Pa.-based coatings and specialty materials concern intends to use the net proceeds for general corporate purposes, which may include working capital; capital expenditures; investments in or loans to subsidiaries or joint ventures; repayment, redemption or refinancing of debt; redemption or repurchase of outstanding securities; funding of possible acquisitions; and satisfaction of other obligations, according to regulatory filings.

Of note, the company on Feb. 19, 2021, entered into a $2 billion term loan credit agreement as it eyes financing the cash consideration for its pending acquisition of Finland-based Tikkurila Oyj.

The company last year tapped the bond markets twice in the pandemic era. In August, as issuers flooded the marketplace for their lowest funding costs on record, PPG reopened its existing 3.75% notes due March 15, 2028, for an additional $100 million at a sub-coupon yield of 0.936%.

Last May, it placed a $300 million offering of 2.55% 10-year notes due June 15, 2030, at T+200. That issue changed hands last week at a tighter T+61 spread (G-Spread: 71 bps), or in the 2% area. Reflecting the sharp rise in Treasury yields in February, that yield level last week was up roughly 30 bps month over month, even as the spread indications held firm.

Fitch today said its negative outlook on PPG reflects expectations that PPG's total debt to operating EBITDA will remain above its negative rating sensitivity through at least the end of 2021, in part due to "two sizeable acquisitions" in the pandemic era, including the Tikkurila Oyj play, and a completed acquisition of Ennis-Flint in December 2020, for $1.15 billion. (Among smaller M&A plays, PPG in February 2021 completed an acquisition of VersaFlex and in January announced a deal to acquire Worwag.) Fitch projects total debt to EBITDA at 2.5x at the end of 2021, before approaching 2.0x at the end of 2022. Terms: