Walter Industries $1.7 billion credit facility expected to be late-summer/early fall business

By Sara Rosenberg

New York, June 22 - Walter Industries Inc.'s proposed $1.7 billion credit facility is targeted to launch into syndication some time around the late-August, early September timeframe, according to a market source.

Banc of America Securities LLC and Morgan Stanley & Co. are joint lead banks on the deal, with Bank of America the left lead.

The credit facility commitment was obtained in connection with Walter's proposed acquisition of Mueller Water Products Inc.

The company is dividing into two separate entities - one comprised of its water group, which will include Mueller and U.S. Pipe, and the other comprised of its energy group and homebuilding and financing group.

The water group has gotten a commitment for a new $1.125 billion credit facility consisting of a $125 million revolver and a $1 billion term loan B, the presentation continued.

The term loan, $19.3 million of revolver borrowings and $98.9 million of super holdco notes will be used to fund a $381 million dividend to U.S. Pipe, fund a $98.9 million dividend to Walter and refinance $683.3 million of existing debt.

Capitalization of the water group will include $315 million of assumed Mueller senior subordinated debt and $116 million of assumed Mueller holding company debt.

Mueller's approximately $100 million second-lien notes that are callable in November will be tendered for upon consummation of the transaction.

The energy/homebuilding/financing group has gotten a commitment for a new $575 million credit facility consisting of a $200 million revolver and a $375 million term loan B.

The term loan, $41.8 million of revolver borrowings, $381 million of U.S. Pipe proceeds and $98.9 million of super holdco notes will be used to fund the acquisition of Mueller and refinance existing revolver debt.

The company's existing $175 million of convertible debt will remain outstanding at this energy/homebuilding/financing entity.

Under the acquisition agreement, Walter will purchase Mueller for $1.91 billion, consisting of about $860 million in cash and the assumption of about $1.05 billion in Mueller debt. The transaction is expected to be accretive by $0.20 to $0.24 per fully diluted share in the first full year after closing.

The acquisition, which is expected to be completed in the third quarter, is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and financing.

Walter Industries is a Tampa, Fla.-based diversified company that operates in homebuilding, related financing, and water transmission products, and is also a producer of high-quality metallurgical coal. Mueller is a Decatur, Ill.-based supplier of water infrastructure and delivery systems.

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