W.R. Grace & Co. is seeking $1.55 billion in loans to support its emergence from bankruptcy, 12 years after it filed for protection from creditors to escape more than 100,000 asbestos-related injury claims.
The financing includes a $700 million term loan, a $200 million term portion denominated in euros, a $250 million delayed-draw term loan and $400 million in revolving lines of credit, according to a court filing yesterday. Goldman Sachs Group Inc., Deutsche Bank AG, Bank of America Corp., HSBC Holdings Plc, Citigroup Inc., KeyCorp, PNC Bank, and Sumitomo Mitsui Banking Corp. are arranging the financing.
Grace, which filed for Chapter 11 protection in 2001 to deal with the asbestos claims, has said it anticipates emerging from bankruptcy on Jan. 31. Last month, the Columbia, Maryland-based company said it would pay lenders $129 million, plus interest from Dec. 31, in addition to the distributions under its reorganization plan, according to a Dec. 23 regulatory filing.
The settlement “removes lingering risk that emergence could once again be delayed by the bank lenders group,” Goldman Sachs analysts led by Brian Maguire wrote in a Dec. 24 report.
The agreement doesn’t change the company’s share-repurchase plan after emergence, and Grace is expected to exit bankruptcy with a debt-to-earnings ratio of 1.5 times and is targeting 2 times to 3 times after the share repurchases, according to the report.
Share repurchases will be a “priority” once the company exits bankruptcy, Hudson La Force, chief financial officer, said on a Sept. 12, 2012, teleconference.
Under the reorganization plan approved in January 2011, Grace will fund a trust to compensate people with lung diseases related to asbestos, once used in products including car brakes and fireproof insulation. Grace was the last of a wave of multibillion-dollar bankruptcies filed in 2000 and 2001 by companies trying to limit their financial exposure to hundreds of thousands of asbestos suits.
In 2012, Grace won the second of two court approvals it needed to end its bankruptcy. Before it could officially exit court supervision, the company first needed to resolve any legal appeals and settle its remaining disputes with lenders.
Proceeds of the term facilities will be used to fully pay outstanding claims, while the revolving lines of credit will probably remain undrawn and will be available to support operating needs, according to the court filing.
In a revolving line of credit, money can be borrowed again once it’s repaid; in a term loan it can’t.
The case is In re W.R. Grace & Co., 01-bk-01139, U.S. Bankruptcy Court, District of Delaware (Wilmington).