AZZ lifts pricing on $1.3 billion term loan B to SOFR plus 425 bps

By Sara Rosenberg

New York, May 6 – AZZ Inc. raised pricing on its $1.3 billion seven-year covenant-lite term loan B to SOFR plus 425 basis points from SOFR plus 375 bps and removed the 25 bps step-down at 0.5x inside closing date first-lien net leverage, according to a market source.

Furthermore, the original issue discount talk on the term loan was changed to a range of 96.5 to 97 from 98, and then finalized at 96.5, and CSA was revised to 10 bps one-month rate, 15 bps three-month rate and 25 bps six-month rate from 10 bps for all tenors, the source said.

Also, the 50 bps MFN was set for life from having a 12-month sunset and the carveout for only syndicated term loans was removed, and the inside maturity basket was changed to the greater of $160 million and 50% of consolidated EBITDA, with proceeds from any inside maturity debt to be used to repay term loan B borrowings, from the greater of $160 million and 50% of consolidated EBITDA.

The accordion was revised to unlimited subject to 4.25x first-lien net leverage from 4.5x first-lien net leverage for pari passu debt, the lesser of 4.5x secured net leverage from 4.75x secured net leverage and the ratio level applicable to the financial covenant then in effect for junior secured debt, and the lesser of 5x total net leverage from 5.25x total net leverage and the ratio level applicable to the financial covenant then in effect for unsecured debt, the source continued.

In addition, general liens was changed to unlimited subject to 4.5x secured net leverage from 4.75x secured net leverage and the ratio level applicable to the financial covenant then in effect for junior secured debt, asset sale step-downs were removed, and reinvestment period was modified to 12 months plus six months with a commitment from 18 months.

And, the excess cash flow sweep was revised to 50% with step-downs to 25% and 0% at 3.75x and 3.25x first-lien net leverage, respectively, from step-downs at 4x and 3.5x first-lien net leverage, general restricted payments basket was changed to the greater of $95 million and 30% of consolidated EBITDA from the greater of $128 million and 40% of consolidated EBITDA, and the unlimited restricted payments ratio was adjusted to subject to 3.25x total net leverage from 3.5x total net leverage.

As before, the term loan has a 0.5% floor, 101 soft call protection for six months and amortization of 1% per annum.

The company’s $1.7 billion of senior secured credit facilities (Ba3/B) also include a $400 million revolver.

Citigroup Global Markets Inc., Wells Fargo Securities LLC, Barclays, CIBC and US Bank are the joint lead arrangers on the deal. Citigroup is the administrative agent.

Recommitments were scheduled to be due at 11 a.m. ET on Friday, the source added.

Proceeds will be used to help fund the acquisition of Sequa Corp.’s Precoat Metals business division for $1.28 billion and to refinance existing debt.

Closing is expected this month, subject to customary conditions and regulatory approvals.

AZZ is a Fort Worth-based provider of galvanizing and metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services for maintaining and building critical infrastructure. Precoat Metals is a St. Louis-based provider of metal coil coating solutions.

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