Kronos prices private offering of an added EUR 75m of 9.50% sr

Kronos prices private offering of an added EUR 75m of 9.50% sr

Kronos Worldwide (NYSE: KRO) has announced a private offering of €75 million in additional 9.50% Senior Secured Notes due 2029 through its subsidiary Kronos International, Inc. This offering supplements the existing €351,174,000 in notes issued in February and July 2024 [1].

The new notes will maintain identical terms as the existing ones and will be fully guaranteed by KRO and its domestic subsidiaries. The proceeds will primarily be used to pay amounts due under the company's 3.75% Senior Secured Notes due September 15, 2025, or to repay any draws from its Wells Fargo credit facility used for the same purpose. This indicates that Kronos is raising €75M in additional debt at 9.50% primarily to refinance maturing debt, maintaining its leverage position rather than reducing it [1].

The significantly higher interest rate on the new notes (9.50% versus 3.75% on the maturing debt) reflects the substantially higher interest rate environment compared to when the original notes were issued. This increased borrowing cost will negatively impact interest expense and cash flow going forward. The notes will carry the same security package as the existing notes - first-priority security interests in certain assets plus guarantees from the parent company and domestic subsidiaries. This suggests reasonable market acceptance despite the high-yield nature of the offering [1].

The transaction structure as an add-on to existing notes rather than a new standalone issuance typically suggests efficiency in execution and potential for slightly better pricing than a new issue would command. Maintaining the company's existing debt maturity schedule without creating a new maturity date demonstrates prudent liability management [1].

The completion of the offering depends on several factors, including market conditions. The Company intends to use the proceeds of the offering, after payment of fees and expenses, to pay amounts due under its 3.75% Senior Secured Notes due September 15, 2025 at maturity (or, alternatively, to repay any amounts the Company may draw under its global revolving credit facility with Wells Fargo to repay such notes at maturity). The Company intends to use any remaining net proceeds for its general corporate purposes [1].

The notes and related guarantees subject to the private placement have not been and will not be registered under the Securities Act, or any state securities laws, and will be offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act and in offshore transactions to non-U.S. persons (within the meaning of Regulation S) outside the U.S. that are not “retail investors” residing in a member state of the EEA or the UK. The Notes and related guarantees may not be offered or sold in the United States or to U.S. persons except pursuant to registration under or an exemption from the registration requirements of the Securities Act and applicable state securities laws [1].

References:
[1] https://www.stocktitan.net/news/KRO/kronos-worldwide-inc-announces-private-offering-of-an-additional-75-dq52aoqhsn4g.html