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Entegris, a supplier of materials for the semiconductor market, navigated unprecedented global volatility in the debt markets to price a US$2.495bn term loan B to back its purchase of CMC Materials.
The Massachusetts-based company announced the acquisition of CMC Materials on December 15 2021. Morgan Stanley provided a sole commitment for an approximately US$5bn financing package to provide certainty for the transaction.
With concerns Russia was preparing to invade Ukraine, Morgan Stanley launched the TLB a week earlier than scheduled, holding a lender call on February 16. That kicked off a multi-part financing that also included senior secured notes and senior notes, with the different aspects of the deal spread across the first two quarters.
“We were getting ready to go; we had a strong view that Russia was going to invade Ukraine,” said Andrew Earls, head of North America leveraged finance at Morgan Stanley. “Then they invaded, we had the momentum, we widened out a little bit because we felt like that was the right thing to do for the market.”
In doing so, the deal was able to avoid the fate of other large acquisition and buyout financings that struggled to find buyers for the debt later in the year as market volatility picked up amid rising inflation, rapid rate hikes from the US Federal Reserve and recession concerns.
On March 2, the company priced a US$2.495bn term loan B at 300bp over SOFR with a 0% floor and a 99 OID. It managed to complete without a credit spread adjustment.
The OID came in tighter than the average for the overall market for the first three months of 2022, according to LPC data. The average OID for all first-lien institutional term loans was 98.92 in the first quarter of 2022 and that dropped to 96.39 in the fourth quarter.
The TLB’s successful outcome was testament to Morgan Stanley’s view that the loan market would be robust enough to take the deal, even if Russia invaded Ukraine.
Morgan Stanley was a bookrunner and administrative agent on the term loan. It also helped to structure a US$275m 364-day unsecured bridge that priced at 455bp over SOFR to provide additional liquidity before the acquisition closed.
On April 5, Morgan Stanley, as lead-left, priced US$1.6bn of senior secured notes due in 2029, an upsize from initial talk of US$1bn. Then on June 16, Entegris priced US$895m of senior notes due in 2030.
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