Milacron LLC is looking to refinance some of its existing debt, proposing up to $140 million in a new term loan, as the plastics machinery maker continues to rebound 11/2 years after emerging from Chapter 11 bankruptcy protection.
The company wants a new senior secured term loan to replace a $75 million second-lien term loan facility from Avenue Capital Group, said John Francy, Milacron's vice president of finance and chief financial officer. If Milacron finds a buyer for its debt, the proposed terms would allow the company to refinance most of its current financial obligations with lower-cost capital with more favorable terms and extended maturity dates. The proposal was announced April 11.
The Avenue Capital loan carried a maturity date of 2014. A new term loan would mature in 2017.
Milacron plans to use a portion of the proceeds from the refinancing to repurchase some existing shares.
New York-based Avenue Capital will continue to own 100 percent of the Cincinnati-based company, Francy said. The stock repurchase will enable Avenue Capital to redeem part of its shares without diluting its ownership interest or commitment to Milacron's future, the company said in a news release.
Francy, in a telephone interview, said the proposed refinancing represents less than half of Avenue Capital's equity investment at the time that Milacron left bankruptcy.
Avenue Capital and another investor group, DDJ Capital Management LLC, held Milacron's senior debt when the company filed for Chapter 11 in March 2009, and also provided other financing. Avenue Capital later bought out DDJ to become the sole owner. Milacron exited Chapter 11 in August 2009 as a new, privately held company.
It allows them to start earning a reasonable return on some of the capital they've invested, Francy said.
Milacron officials also announced that the company has extended the maturity date, and improved terms, on its existing $50 million revolving credit line with Wells Fargo & Co. The original maturity date was 2012, and now that has been pushed out to 2016.
The revolver also has a lower interest rate, reduced annual fees and other more favorable terms, Francy said.
As it seeks investors for the new term loan, Milacron is in a strong financial position after its post-Chapter 11 restructuring and because of ongoing operational improvements and the stronger economy, Francy said. Milacron has been generating cash and making a profit since coming out of bankruptcy, he said.
That has helped Milacron get better financing. The big picture is, it's refinancing our debt at more favorable rates, terms and conditions, and pushing out the maturity significantly, Francy said.