Summary
Howmet Aerospace Inc. (HWM), in preparation for its upcoming spin-off of Arconic Rolled Products Corporation (the "Borrower"), has entered into a significant credit facility. This $1.6 billion senior secured financing package, effective March 25, 2020, comprises a $600 million seven-year term loan B facility and a $1 billion five-year revolving credit facility. The company has already drawn the full $600 million under the term loan facility. The proceeds from this financing, along with a prior $600 million notes offering, are earmarked for a distribution to the parent company, covering transaction-related fees and expenses, and general corporate purposes. The credit agreement includes customary covenants, financial maintenance requirements (consolidated total leverage ratio not greater than 2.50x and interest coverage ratio of at least 3.00x), and events of default, designed to secure the obligations through guarantees from the Borrower's U.S. subsidiaries and a lien on substantially all of their tangible and intangible assets.
Key Highlights
- 1Howmet Aerospace Inc. (HWM) has secured a new $1.6 billion senior secured credit facility in anticipation of the spin-off of Arconic Rolled Products Corporation.
- 2The financing consists of a $600 million seven-year term loan B facility and a $1 billion five-year revolving credit facility.
- 3The full $600 million under the Term Facility was borrowed on the closing date of the financing (March 25, 2020).
- 4Proceeds will be used for a distribution to the parent company, transaction expenses, and general corporate purposes.
- 5The credit facilities are guaranteed by substantially all of the Borrower's U.S. subsidiaries and secured by a first-priority lien on their assets.
- 6Key financial covenants include a maximum consolidated total leverage ratio of 2.50x and a minimum consolidated interest coverage ratio of 3.00x.
- 7The spin-off of Arconic Rolled Products Corporation is scheduled to be effective on April 1, 2020.