Actuant to get $250 million in new bank debt for Key Components acquisition

By Sara Rosenberg

New York, Nov. 19 - Actuant Corp. plans to approach the bank loan market in the near future with $250 million of new senior debt, which it hopes will be in the form of term loan debt, to help fund the acquisition of Key Components Inc., a company spokesman told Prospect News on Friday.

J.P. Morgan Securities Inc. and Wachovia Securities are arranging the acquisition bank financing.

The company's $250 million five-year revolving credit facility, which was obtained in February via Bank One and currently bears interest at Libor plus 125 basis points, is expected to remain in place, the spokesman said.

However, this revolver will need to be modified since it has a limit on acquisitions contained in the credit agreement. Therefore, lender consent will be sought to allow for this transaction, the spokesman explained.

Under the acquisition agreement, Actuant will purchase Key Components from an investor group lead by Kelso & Co. for about $315 million, including the assumption of about $80 million of 10.5% bond debt. The transaction is expected to close before year-end.

In addition to the new bank debt, Actuant plans to issue about $125 million of its class A common stock through a public offering, the proceeds of which would be used to fully retire the Key Component senior notes and reduce senior debt borrowings. But, the equity offering is not needed to successfully close on the acquisition.

"As we have communicated in the past, Actuant's desired leverage level is between two and three times debt to EBITDA. After the proposed equity offering, our leverage is expected to be near the top end of the targeted range, but we expect to use future operating cash flow to reduce this further," chief financial officer Andrew G. Lampereur said in a company news release.

Actuant is a Milwaukee-based diversified industrial company. Key Components is a Tarrytown, N.Y.-based manufacturer of custom engineered products for a diverse array of end-user markets.

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