Olin has arranged a new $2.5 billion package of credit facilities intended to replace its existing borrowing arrangements and Huntsman’s revolving credit facility when the companies complete their previously announced merger. The financing is conditional on the merger closing and other conditions being met.
The package combines a $750 million term loan with a $1.75 billion revolving credit facility. Olin also amended a separate agreement tied to two 2010 bond issues; that amendment is set to take effect at the same time as the new credit facilities.
Key details
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The financing is conditional on the merger closing. The new facilities are expected to take effect on the closing date of Olin’s merger of equals with Huntsman. Olin will be the sole borrower, though it may add wholly owned subsidiaries as borrowers under the revolving facility.
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The term loan is expected to be fully drawn at closing. Olin expects to use the term-loan proceeds, along with any revolver borrowings made at closing, to refinance its existing credit agreement, repay and terminate Huntsman’s revolving facility, and cover related fees and expenses. Any remaining proceeds would go toward working capital and other general corporate purposes.
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The revolving facility will provide ongoing borrowing capacity. After closing, Olin can borrow under it for working capital and other general corporate needs, subject to customary conditions. It supports borrowing in U.S. dollars, euros, sterling and certain other currencies; the term loan is in U.S. dollars.
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Both facilities mature five years after closing. The term loan requires quarterly principal payments starting with the first full fiscal quarter after closing: 1.25% of its original principal amount per quarter through the quarter that includes the fourth anniversary, then 1.875% per quarter.
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Rates vary with Olin’s leverage. Borrowings will carry a benchmark rate—SOFR, EURIBOR or SONIA, as applicable—plus a margin of 1.50% to 2.125%, or a base rate plus 0.50% to 1.125%. The applicable margin depends on Olin’s consolidated net leverage ratio.
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The facilities will initially be secured and guaranteed. During a period after closing, certain Olin subsidiaries—and, following the merger, certain Huntsman subsidiaries—will guarantee the debt. The facilities will also have first-priority liens on certain assets, subject to customary exceptions. Olin may elect to release the guarantees and liens if it certifies that it meets specified leverage and interest-coverage thresholds; the announcement does not give those election thresholds.
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Some asset-sale proceeds may have to repay the term loan. During the secured period, Olin generally must use net proceeds from certain asset sales and casualty events to prepay the term loan, subject to reinvestment rights and other exceptions.
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Financial tests become more demanding over time. During the secured period, Olin must keep net leverage at or below 5.50 times through the quarter ending March 31, 2027, with the ceiling stepping down to 4.00 times by the quarter ending March 31, 2029. Its interest-coverage ratio must be at least 2.50 times through the quarter ending September 30, 2027, stepping up to 3.00 times by March 31, 2029. After the secured period, the required limits are 4.00 times or less for net leverage and at least 3.00 times for interest coverage.
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The agreement also restricts certain actions. Among other limits, it restricts additional debt and liens, asset sales, and dividends or distributions above Olin’s regularly scheduled dividends. Some restrictions apply only, or are tighter, while the facilities are secured.
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A separate bond-related agreement will also be amended at closing. Olin and Olin Winchester amended a credit and funding agreement associated with 2010 bonds issued for projects in Mississippi and Tennessee. The amendment will take effect only if the new credit facilities close; the terms described in the announcement do not specify the substance of the covenant changes.
Plain-English implications
If the merger closes, Olin will become the sole borrower under a unified credit package that replaces both companies’ existing revolving arrangements and adds a fully drawn term loan. The initial guarantees and liens extend to certain subsidiaries on both sides of the merger, while Olin’s ability to release that security is tied to meeting specified financial tests.