Metaldyne revises commitment letter to provide for $570 million credit facility

By Sara Rosenberg

New York, Nov. 28 - Metaldyne Corp. has revised its credit facility commitment letter to provide for a $570 million credit facility in connection with its acquisition by Asahi Tec Corp., according to an 8-K filed with the Securities and Exchange Commission Tuesday.

The revised facility consists of a $420 million term loan and a $150 million asset-based revolver.

Originally, the company was planning to obtain an $820 million credit facility, consisting of a $200 million five-year senior secured asset-based revolver with an initial expected interest rate of Libor plus 200 basis points and a 37.5 bps commitment fee, a $60 million five-year deposit-linked synthetic supplemental letter-of-credit facility with an expected interest rate of Libor plus 350 bps, and a $560 million seven-year term loan with an expected interest rate of Libor plus 350 bps. Pricing on the letter-of-credit facility and the term loan were going to be able to reduce to Libor plus 300 bps if Metaldyne's corporate credit ratings were at least B2/B.

The original commitment letter was provided by JPMorgan, Deutsche Bank and Citigroup.

The new facility will replace Metaldyne's existing revolver, letter-of-credit facility, term loan debt and off-balance sheet accounts receivable securitization facility.

Asahi Tec may elect not to close on the merger if both Metaldyne's corporate credit ratings from Moody's Investors Service and Standard & Poor's are not at least B3/B- with a stable outlook and the cost of the new senior term loan under the new credit facility is greater than Libor plus 450 bps, or Libor plus 500 bps if the closing occurs after Dec. 31.

The changes to the credit facility commitment resulted from the company having to amend its acquisition agreement with Asahi Tec, primarily to address the higher-than-anticipated costs of obtaining consents from Metaldyne's noteholders.

The merger agreement has been modified to delete the condition that a minimum amount of Metaldyne's 10% senior subordinated notes due 2014 and 11% senior subordinated notes 2012 be tendered in a tender offer and funds that would otherwise have been used for a tender offer are being used to reduce senior bank debt.

Metaldyne now expects to pay about $48 million in consent fees to noteholders to obtain their consents. The economic terms of the merger agreement have been adjusted to reflect these increased costs and the impact of recent production cuts by Metaldyne's largest customers, meaning that the merger consideration that would have been payable to Metaldyne's common stockholders and series B preferred stockholder have been reduced.

Under the amended deal, 97% of Metaldyne stock will receive $1.5243 in cash for each share, down from the originally proposed amount of $2.18 per share. The balance of the common stockholders will receive at least $2.57 for each share, up from the originally proposed $2.40 per share, and may receive a higher price if Asahi Tec's average stock price is higher at closing than at signing of the amended merger agreement.

In addition, the revised agreement increases the amount of required equity from Asahi Tec for the transaction to a maximum of $200 million from a maximum of $175 million.

Metaldyne is targeting a closing by Jan. 15, 2007, but the transaction may close sooner if the conditions in the merger agreement are satisfied or waived.

Asahi Tec, a Shizuoka, Japan-based chassis and powertrain component supplier, is buying Metaldyne from Heartland Industrial Partners LP and CSFB Private Equity

Metaldyne is a Plymouth, Mich., supplier of powertrain and chassis systems and components.

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