SPX Flow touts summer bond deal, credit facility amendment; looks forward to 2017 deleveraging

By Paul Deckelman

New York, Sept. 15 – SPX Flow, Inc. – which reaches its one-year anniversary as an independent, stand-alone company later this month – has recently been busy in the capital markets, modifying some of the debt the Charlotte, N.C. based company inherited when it was spun off a year ago by former corporate parent SPX Corp.

This included $600 million of existing 6 7/8% notes due 2017 which the parent – a Charlotte, .N.C.-based HVAC products, detection and measurement technologies and power equipment – assigned to the new company that was created when it spun off its flow technology and hydraulic technology assets into SPX Flow.

And there was a new $1.35 billion five-year credit agreement for the new company consisting of a $400 million term loan facility; a domestic revolving credit facility of up to $250 million, available for loans and letters of credit; a global revolving credit facility of up to $200 million equivalent, available for loans in euros, sterling and other currencies; a participation multi-currency foreign credit instrument facility of up to $250 million equivalent, available for performance letters of credit and guarantees; and a bilateral multi-currency foreign credit instrument facility of up to $250 million equivalent, available for performance letters of credit and guarantees.

SPX Flow’s president and chief executive officer, Marc Michael, told participants Thursday at the 4th Annual Morgan Stanley Laguna Conference in Dana Point, Calif., that addressing its debt structure was one of the company’s important achievements coming out of the 2016 fiscal second quarter ended July 2 and moving into the current fiscal third quarter, which is scheduled to end on Oct. 2.

Michael noted that SPX Flow refinanced the $600 million of inherited 2017 notes into a pair of equally sized $300 million tranches of eight- and 10-year notes.

Those tranches of 5 5/8% senior notes due 2024 and 5 7/8% senior notes due 2026 each priced at par on Aug. 4 in a regularly scheduled forward calendar offering.

The company tendered for the existing 6 7/8% notes, with $486.6 million tendered by the time the offer closed on Aug. 9, with the company paying $1,061.48 per $1,000 principal amount. It then called the remaining $113.4 million of the notes for redemption on Sept. 9.

CEO Michael also said that the company and its banks amended its credit facility, raising the maximum consolidated leverage ratio allowed for any period of four consecutive fiscal quarters to 4 times from 3.25 times

“So we made good progress in August around our debt structure ... to solidify the foundation for the future. That was a nice outcome,” he said.

He added that “as we think toward the future and we put together a model, it’s really to get to an EBITDA performance of just under $300 million and $5 of free cash flow per share.

Looking ahead to 2017, the CEO said that “as we move into 2017, we’ll expect free cash flow to pick up, based on some of the outflows that we’ve got that are in some cases one-time events this year , and in 2017, we would expect less going towards restructuring also. So that’s going to help in terms of deleveraging , just the additional cash flow that we expect to achieve – we’ll take some of that, [which] I can put against short-term debt that we have.

“So we do want to de-lever as we’re going through 2017.”

© 2015 Prospect News.
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