Culligan sets talk on $1.1B term loan, $250M DDTL; commitments due Feb. 16

A Morgan Stanley-led arranger group is out with price talk on the $1.1 billion first-lien term loan and $250 million delayed-draw term loan for Culligan International Co., according to sources. Commitments will be due by 5 p.m. ET on Feb. 16.

The spread on the covenant-lite term loan due July 2028 will be based on a pricing grid at 400 basis points over the secured overnight financing rate 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 is in the range of 99-99.5. There is no credit spread adjustment, and lenders will be offered six months of 101 soft call protection.

The delayed-draw term loan will have no ticking fee for the first 45 days, then the fee will be 50% of the margin from days 46-90, stepping to 100% of the margin thereafter.

Proceeds from the deal will be used to fund the company's acquisition of Waterlogic Group Holdings 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 shareholder of the combined company, while Castik Capital, Waterlogic's management team and other existing Waterlogic shareholders will maintain a minority ownership position in Culligan.

Culligan is currently rated B/B3, with a stable outlook from both S&P Global Ratings and Moody's. 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.

Article amended at 1:35 p.m. ET on Feb. 11, 2022, to adjust the maturity date of Culligan's covenant-lite term loan.