Olin announces plans for $572 million notes, $1 billion term loans

By Angela McDaniels

Tacoma, Wash., May 8 – Olin Corp. received a commitment for a bridge loan to fund its acquisition of Dow Chemical Co.’s chlorine products business and plans to permanently fund the acquisition with new debt securities and/or term loans, according to an S-4 filing with the Securities and Exchange Commission.

More specifically, Blue Cube Spinco Inc. will issue the new debt, which will include debt securities, term loans or a combination of debt securities and term loans. Dow will contribute its chlorine products business to Blue Cube Spinco, which will then be acquired by Olin. Once the merger is complete, Olin expects to guarantee the new debt.

New debt

Blue Cube expects to issue up to $572 million of senior debt securities. The interest rate will be based on then-current market conditions at the time of issuance.

JPMorgan Chase Bank, NA, J.P. Morgan Securities LLC, Wells Fargo Bank NA and Wells Fargo Securities, LLC agreed to try to assemble a syndicate to provide a $500 million senior revolving credit facility to Olin and up to $1 billion of senior term loans to Blue Cube.

Wells Fargo and JPMorgan agreed to provide commitments for the new credit facilities in an amount equal to the lesser of 20% of the credit facilities and $200 million, subject to the uncommitted portion of the credit facilities being provided by one or more other lenders.

The proceeds will be used to finance the merger and to refinance Olin’s existing credit facilities.

Blue Cube will also use a portion of the proceeds to make a special payment to Dow prior to the spinoff.

The special payment amount will be equal to the below-basis amount, i.e., $875 million. Dow can decrease or increase this amount but not to more than $1.05 billion without the consent of Olin.

Splitco securities

Blue Cube might also issue Splitco securities to Dow that would ultimately be exchanged for existing Dow debt and sold to third-party investors. Instead of the Splitco securities, Dow can choose to receive an amount in cash equal to the above-basis amount, which is $2.03 billion less the below-basis amount.

Olin and Dow currently expect Blue Cube to issue about $1.16 billion principal amount of the Splitco securities, which will be guaranteed by Olin. They are expected to have a term of at least eight years and to be non-callable for at least five years.

If the Splitco securities are issued, Dow expects to transfer them to investment banks and/or commercial banks around the closing date of the merger in exchange for existing Dow debt. The Splitco securities are subsequently expected to be sold by the banks to third-party investors.

Dow expects to receive about $2.03 billion from the special payment and the debt exchange.

Bridge facility

JPMorgan and Wells Fargo agreed with Olin to provide up to $3,355,000,000 of senior bridge loans to Blue Cube.

The commitment is good through Dec. 26, 2015.

Borrowings under the bridge loan are expected to mature 364 days after the closing date of the merger.

The initial interest rate will be Libor plus 175 basis points. Every three months, the margin will increase by 25 bps if Olin’s rating is BBB- or higher from Standard & Poor’s and Baa3 or higher from Moody’s or 50 bps otherwise.

The duration fee is 50 bps on the 90th day after the closing date of the merger, 75 bps on the 180th day and 100 bps on the 270th day.

Dow Chemical is a Midland, Mich.-based specialty chemicals company. Its chlorine products business includes its U.S. chlor alkali and vinyl, global epoxy and global chlorinated organics business.

Based in Clayton, Mo., Olin’s three main business segments are chlor alkali products, chemical distribution and Winchester, which produces ammunition.

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