US-based space technology manufacturer GenCorp is eyeing US$510m in debt for its proposed acquisition of local rocket systems developer Rocketdyne.
GenCorp plans to acquire the group for a total US$550m, of which the US$40m that is not debt will come…
US-based space technology manufacturer GenCorp is eyeing US$510m in debt for its proposed acquisition of local rocket systems developer Rocketdyne.
GenCorp plans to acquire the group for a total US$550m, of which the US$40m that is not debt will come from cash on hand.
For the debt, commitments have been agreed with Morgan Stanley and Citigroup, which will provide senior unsecured bridge loans in an aggregate principal amount of up to US$510m. These 12-month loans will initially bear interest at a rate of 7.5% over LIBOR, according to a GenCorp SEC filing.
The debt agreement also enables Gencorp to incur up to US$50m in additional term loans under an existing senior credit facility, which would reduce its bridge loan commitments.
On a more permanent basis, the company plans to replace the bridge loan facility with senior or subordinated notes, either by private placement or an underwritten public sale.
The timing of these notes is dependent on market conditions. If any debt is remaining on the bridge loans after their 12-month maturity, it will be automatically converted “to a term loan on terms and conditions that are likely to be significantly less favourable to the company”, said GenCorp.
GenCorp and Rocketdyne, which is being sold by technology and aerospace giant United Technologies Corp (UTC), expect the acquisition to close in H1 2013, subject to regulatory approvals.
The acquisition is significant for GenCorp because it will see the company almost double in size.
For the year to 31 December 2011, Rocketdyne generated US$792m in net sales and US$149m in EBITDAP. Gencorp, for the year to 30 November 2011, posted US$918m in net sales and US$115m in EBITDAP.
One of GenCorp’s core businesses is its rocket propulsion specialist Aerojet. The parent company has yet to specify whether Rocketdyne would be merged with Aerojet, although it has stated that the acquisition would provide consolidation and cost saving benefits for the latter.
UTC is using the proceeds of its Rocketdyne sale to help repay a portion of the short-term debt being used to finance its US$16.5bn takeover of manufacturer Goodrich, which was completed on 26 July 2012.
