Lincoln Electric Holdings, Inc. has completed a significant round of financing, issuing $550 million in a new series of senior unsecured private placement notes. The purpose of this issuance is to repay the company's $400 million term loan and for general corporate purposes. This move aligns with the company's higher standard 2025 strategy.
The breakdown of the senior unsecured private placement notes is as follows: Series A: $75 million at 5.55% per annum, maturing in August 2029 Series B: $75 million at 5.62% per annum, maturing in August 2031 * Series C: $400 million at 5.74% per annum, maturing in June 2034
Following these transactions, the company will have $1.25 billion in total debt outstanding under the new and existing senior unsecured private placement notes. The weighted average interest rate, including the impact of interest rate swaps, is 4.08% with an average tenor of 9.5 years. The company expects its full-year 2024 'interest expense, net' position to be relatively steady compared to the prior year.
In addition to the senior unsecured private placement notes, the company terminated its 2021 $500 million revolving credit facility and entered into a new five-year credit agreement for a $1 billion revolving credit facility. This move increases the company’s liquidity to align with higher EBITDA performance.
The new revolving credit facility will initially bear interest on outstanding borrowings at a per annum rate equal to SOFR plus 1.10% and could fluctuate based on the company’s total net leverage ratio at a spread ranging from SOFR plus 1.10% to SOFR plus 1.60%. The financial covenants consist of a maximum net leverage ratio of 3.5x EBITDA and a minimum interest coverage ratio of 2.5x EBITDA. Notably, the company had no outstanding borrowings under the new revolving credit facility at closing.
It's important to note that the notes were offered only to qualified institutional buyers and were not registered under the Securities Act of 1933 or any state securities laws. Therefore, they may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements. The market has reacted to these announcements by moving the company's shares 1.1% to a price of $189.92. For the full picture, make sure to review Lincoln Electric's 8-K report.
