8 Dec, 2021

Fairbanks Morse launches $240M 1st-lien, $40M 2nd-lien term loans

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By Jonathan Hemingway

Fairbanks Morse Defense is in the market with $240 million first-lien and $40 million second-lien incremental term loans, according to sources. A lender call is scheduled for 1 p.m. ET on Dec. 9, and commitments to the Jefferies-led deal are due by 5 p.m. ET on Dec. 17.

The first-lien add-on is offered at 99-99.5 and will be fungible with the existing term loan due June 2028 that is priced at L+475 with a 0.75% Libor floor. At talk, the yield to maturity is 5.72%-5.81%. Pro forma for the add-on, the tranche size will be $985 million.

Price talk for the second-lien is 98.5-99, and it will be fungible with the existing term loan due June 2029 that is priced at L+825 with a 0.75% floor. That indicates a yield of around 9.52%-9.63%. The pro forma tranche size is $252.5 million.

There is no change to call protection on either tranche.

Proceeds from the deal will be used to finance an acquisition and repay borrowings under the company's asset-based facility.

In June, the company placed the initial $530 million first-lien and $165 million second-lien covenant-lite term loans to refinance debt and to fund a shareholder distribution. The first-lien tranche was issued with six months of 101 soft call protection, and the second-lien term loan included hard calls at 102 and 101 in years one and two, respectively. The borrower in September added on another $215 million to the first-lien tranche and $47.5 million to the second-lien to finance an acquisition.

Current first-lien ratings are B/B2, with a 3 recovery rating from S&P Global Ratings, and second-lien ratings are CCC+/Caa2, with a recovery rating of 6. Corporate ratings are B/B3, with stable outlooks. Arcline FM Holding LLC is the borrower.

Fairbanks Morse Defense, backed by Arcline Investment Management, provides propulsion systems, ancillary power, motors and controllers for the U.S. Navy and U.S. Coast Guard and provides associated parts and maintenance, repair and overhaul services to its installed base of equipment.