Banks led by Credit Suisse Group AG are cutting the price on financing backing Kraton Performance Polymers Inc.’s takeover of Arizona Chemical Holdings Corp. to attract investors who have shunned risky borrowings amid the worst rout in leveraged loans since 2008.
A $1.35 billion loan for the maker of specialty-chemicals is being offered at around 92 cents on the dollar, compared with an initial offer of 98 cents, according to a person with knowledge of the deal, who asked not to be identified because the terms are private.
Nomura Holdings Inc. and Deutsche Bank AG are also arranging the debt with Credit Suisse, the people said. Representatives for the three lenders declined to comment.
The company has secured committed financing for the transaction, Kraton’s Chief Financial Officer Stephen Tremblay said in a Sept. 28 conference call discussing the merger.
The banks also increased the yield on $425 million of bonds backing the financing from an initial offer of about 10 percent, said other people with knowledge of the deal. The notes are rated CCC+, or seven levels below investment-grade, by Standard & Poor’s.
Leveraged loans have lost 3.3 percent this year, following gains of about one percent in 2014, according to the S&P/LSTA U.S. Leveraged Loan 100 Index. Issuance of the debt has plunged by about 30 percent from this time last year to $372 billion, according to data compiled by Bloomberg.
Kraton is purchasing private equity-owned Arizona Chemical’s for $1.37 billion to expand its position in the market for additives and materials for adhesives and coatings. The U.S. company has earmarked $65 million in savings as it integrates Arizona, to be purchased from buyout firm American Securities, Kraton said in a release on Sept. 28.