US-based space technology manufacturer GenCorp plans to raise US$460m from selling second-priority senior secured notes due 2021 in a private placement.
Net proceeds will support Gencorp’s US$550m transformational acquisition of rocket systems…
US-based space technology manufacturer GenCorp plans to raise US$460m from selling second-priority senior secured notes due 2021 in a private placement.
Net proceeds will support Gencorp’s US$550m transformational acquisition of rocket systems developer Pratt & Whitney Rocketdyne, which it expects to close later this year.
Morgan Stanley is lead arranger for the bond.
To fund the acquisition, the company also plans to draw upon a new US$50m loan under an existing senior credit facility. It will use cash on hand to fund the remainder.
The plan to acquire Rocketdyne from US conglomerate United Technologies Corp (UTC) was first announced in July 2012. At the time, Morgan Stanley and Citigroup agreed to provide commitments for a bridge loan of up to US$510m to fund the deal.
However, in order to receive Federal Trade Commission (FTC) approval, Gencorp has said it may need to offload certain assets to ensure the acquisition goes ahead.
Specifically, the group said it may be required to divest its liquid divert and attitude control systems product line, and it expects to use US$4.7m of cash to cover the associated costs from offloading this.
A spokesman said the company was hopeful of finding a buyer for the assets, but declined to comment further.
If the company is unable to consummate the Rocketdyne acquisition on or before 21 July 2013, it could be required to redeem its new notes at 100% of their issue price, plus interest. There is also a US$20m break-up fee that would need to be paid to UTC if the deal falls through.
Rocketdyne is best known for providing the main engine for the now retired NASA space shuttle. Its engines have also been used on Lockheed Martin’s Atlas 2 rockets and Boeing’s Delta IV rockets.
If approved, the acquisition will almost double GenCorp’s size. Rocketdyne generated US$792m in net sales and US$149m in EBITDAP for the year to 31 December 2011. GenCorp, for the year to 30 November 2011, posted US$918m in net sales and US$115m in EBITDAP.
Citigroup is advising GenCorp on the transaction while Deutsche Bank and Moelis are advising UTC.
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