Kraton Polymers launches $350 million facility at Libor plus 325 bps

By Sara Rosenberg

New York, Jan. 25 - Kraton Polymers LLC held a bank meeting on Tuesday morning to launch a proposed $350 million five-year senior secured credit facility that is being talked at Libor plus 325 basis points with no Libor floor, according to a market source.

The facility consists of a $150 million revolver and a $200 million term loan A, the source said.

Upfront fees are set according to the revolver commitment, with $10 million or more towards the revolver getting a 3:1 ratio of term loan to revolver and 75 bps on total allocation. Investors will get the same 3:1 ratio for revolver commitments of less than $10 million, but will only get paid 50 bps on total allocation, the source added.

Bank of America, Morgan Stanley, Goldman Sachs, Credit Suisse and Macquarie are the lead banks on the deal, with Bank of America the left lead.

Amortization on the term loan A is 5% in years one and two, 7.5% in year three, 10% in year four and 72.5% in year five.

There is a $125 million accordion feature.

Financial covenants include a consolidated net leverage ratio, a consolidated net interest coverage ratio and maximum capital expenditures.

Proceeds from the facility, along with $200 million in eight-year senior unsecured notes, will be used to refinance existing debt, including senior notes, discount notes and term loan debt due in 2013 and 2014.

The revolver is expected to be undrawn at close.

The company said in an 8-K filed with the Securities and Exchange Commission that refinancing the capital structure at this time takes advantage of an attractive low cost rate environment, extends the company's maturity profile to 2016 and 2019, and brings a significant liquidity enhancement from an $80 million cash flow revolver.

Pro forma for the transaction, total senior secured debt to EBITDA will be 1.02 times and total debt to EBITDA will be 2.04 times.

Kraton Polymers is a Houston-based producer of styrenic block copolymers for use in industrial and consumer applications.

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