A Morgan Stanley-led arranger group has revised terms on the term loan transaction for Culligan International Co. that will amend the issuer's existing $2.1 billion funded first-lien term loan and $150 million delayed-draw term loan to transition the facilities to a base rate of the secured overnight financing rate, from Libor, and its new $1.1 billion incremental first-lien term loan and $250 million delayed-draw incremental first-lien term loan, according to sources. Re-commitments are due by noon ET today, with allocations to follow thereafter.
The incremental term loan due July 2028 will be based on a pricing grid of 400 basis points over Sofr when leverage is greater than 4.75x, stepping to Sofr+375 when leverage is between 4.25x and 4.75x, and Sofr+350 when leverage is less than or equal to 4.25x. There will be a 0.50% floor, and the original issue discount firmed at 99.25. The amendment will transition the existing term loan to the same pricing, and the issue price will be par. There is no credit spread adjustment, and lenders will be offered six months of 101 soft call protection.
The ticking fee on the incremental term loan will be 0% for the first 45 days, then it is set at 50% of the margin for days 46-90, stepping to 100% of the margin thereafter. The delayed-draw tranche will have the same ticking fee.
Note that prior to the effectiveness of the amendment, the borrower intends to draw down all existing delayed-draw commitments undrawn as of the post date of the amendment.
Proceeds from the incremental term loan deal will be used to fund the company's acquisition of Waterlogic Group Holdings Ltd. and for general corporate purposes.
Culligan was last in the loan market in June 2021 with a $2 billion funded first-lien term loan and a $250 million delayed-draw tranche that was issued to back the buyout of the company by BDT Capital Partners. The loan is priced at L+400, with a 0.5% Libor floor, and has 25-bps margin step-downs at 0.5x and 1x inside the closing first-lien net leverage. The previous sponsor, Advent International, retained a minority interest in the company. Financing for the transaction also included a $225 million, five-year revolving credit facility.
Waterlogic, backed by Castik Capital, also has a first-lien term loan due August 2028 (L+475, 0.5% Libor floor) and a €340 million euro-denominated first-lien term loan due August 2028 (E+425, 0% floor) that were both issued in August 2021 to refinance debt and fund add-on acquisitions.
BDT Capital Partners and its co-investors will be the majority shareholders of the combined company, while Castik Capital, Waterlogic's management team and other existing Waterlogic shareholders will maintain a minority ownership position in Culligan.
S&P Global Ratings has affirmed its first-lien and issuer ratings of B, with a 3 recovery rating and a negative outlook, while Moody's has assigned a facility rating of B3 to the incremental facility and affirmed its B3 corporate rating with a stable outlook. The rated entity is AI Aqua Merger Sub Inc., and the borrower is Osmosis Debt Merger Sub Inc.
Culligan provides water treatment solutions for homes, offices, restaurants and industrial facilities. Waterlogic designs, manufactures, distributes and operates point-of-use drinking water purification and dispensing systems.
