KMG Chemicals flexes $550 million term loan B to Libor plus 425 bps

By Sara Rosenberg

New York, June 8 – KMG Chemicals Inc. reduced pricing on its $550 million seven-year term loan B to Libor plus 425 basis points from Libor plus 475 bps and added a step-down to Libor plus 400 bps based on leverage, according to a market source.

In addition, the original issue discount on the term loan was revised to 99.5 from 99, the source said.

The term loan still has a 1% Libor floor and 101 soft call protection for six months.

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.

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

Recommitments are due on Friday afternoon, the source added.

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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