Valvoline has announced a $375 million, eight-year (non-call three) offering of senior notes. Citi (left), Bank of America Merrill Lynch, Morgan Stanley, Scotia, Deutsche Bank, Goldman Sachs, and J.P. Morgan are joint bookrunners. A roadshow will run today through Thursday, with pricing expected on Thursday afternoon.

Proceeds will be transferred to Ashland, which will then repay its unsecured credit facilities. Ashland has not made a final determination about which facilities or the amounts it will repay, according to the preliminary offering memorandum.

In September last year, Ashland announced its plan to separate into two independent, publicly traded companies: one comprising Ashland’s specialty ingredients and performance materials businesses (the chemicals business); and the other comprising its Valvoline business.

Valvoline plans to use the net proceeds from the proposed IPO to repay short-term debt in full and to reduce obligations under its senior-secured term loan facility, to a maximum of $375 million. Proceeds from the new notes will be held in escrow in case the IPO does not take place.

The bonds include an investor-friendly first call at par plus 75% coupon, and a 40% equity claw (excluding the proposed IPO).

As reported, bonds backing specialty chemicals maker Ashland dropped 2-3 points when the spin-off was announced last year. Ashland’s most-actively traded bonds—the 4.75% notes due 2022—were at 97.5/98.35. They have since recovered strongly, to close last night at 102.75, yielding 4.2%, according to S&P Global Market Intelligence.

Valvoline operates in the global automotive lubricant industry. — Luke Millar

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