KMG Chemicals launches $550 million term loan B at Libor plus 475 bps

By Sara Rosenberg

New York, May 23 – KMG Chemicals Inc. launched on Tuesday its $550 million seven-year term loan B with price talk of Libor plus 475 basis points with a 1% Libor floor and an original issue discount of 99, according to a market source.

The term loan B has 101 soft call protection for six months, the source said.

Amortization on the term loan B is 1% per annum.

The company’s $600 million of senior secured credit facilities (B2/B+) also include a $50 million five-year revolver.

The facilities have a maximum total net leverage ratio covenant.

Incremental allowance is $100 million, subject to closing date consolidated total net leverage ratio and no event of default.

KeyBanc Capital Markets Inc., HSBC Bank USA and J.P. Morgan Securities LLC are the joint lead arrangers on the deal.

Commitments are due on June 9.

Proceeds will be used to fund the acquisition of Flowchem from Arsenal Capital Partners for $495 million, including working capital of about $17 million, to refinance existing debt and for general corporate purposes.

Closing is expected on June 15, subject to customary conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Pro forma total leverage will be 5.26 times utilizing $104.6 million of pro forma adjusted EBITDA.

KMG is a Fort Worth-based producer and distributor of specialty chemicals. Flowchem is a Waller, Texas-based manufacturer of pipeline performance products.

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