Element Solutions (ESI) Wraps Up $1.15B Term Loan Syndication
Element Solutions Inc ESI has announced the completion of the syndication of a seven-year secured term loan credit facility totaling $1.15 billion under its credit agreement.
Element Solutions prepaid its current $1,105 million term loan B-1 tranche and $150 million term loan A using the proceeds of the new $1,150 million term loan B-2 facility and cash on hand.
The new term loan B-2 tranche, with its applicable interest rate of SOFR plus a spread of 2.00% annually, has almost the exact same terms as the previous term loan B-1 tranche, with the exception of its maturity date.
ESI monetized existing interest rates and cross-currency swap arrangements originally set for maturity in 2024 and 2026 in connection with the funding of the new term loan B-2 tranche.
It then entered into new interest rate and cross-currency swap agreements, thereby converting $760 million of the term loan B-2 tranche, which was denominated in U.S. dollars, into fixed-rate euro-denominated debt at a fixed EUR all-in rate of 4.31%. These new swaps will mature in 2028. The remaining $390 million is subject to existing swaps that are slated to mature in 2025.
The company is extending the maturities of a large portion of its secured debt to 2030 and lowering gross debt by more than $100 million through this transaction — all without raising margin. With the new swaps in place, the company now has around 80% of its capital structure set until 2028, effectively minimizing interest rate risk in the current higher rate environment.
Shares of Element Solutions have gained 21.1% over the past year compared with 16.4% rise of its industry.
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ESI, on its third quarter call, revised its adjusted EBITDA guidance to nearly $485 million for 2023.
It estimates full-year 2023 adjusted earnings per share of around $1.30. ESI anticipates generating a free cash flow of about $265 million for 2023.
Element Solutions Inc. Price and Consensus
Element Solutions Inc. price-consensus-chart | Element Solutions Inc. Quote
Zacks Rank & Key Picks
Element Solutions currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the basic materials space include Denison Mines Corp. DNN, Axalta Coating Systems Ltd. AXTA and Hawkins, Inc. HWKN.
Denison Mines has a projected earnings growth rate of 100% for the current year. It currently carries a Zacks Rank #1 (Strong Buy). DNN delivered a trailing four-quarter earnings surprise of roughly 225%, on average. The stock is up around 60% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axalta has a projected earnings growth rate of 5.4% for the current year. It currently carries a Zacks Rank #1. AXTA delivered a trailing four-quarter earnings surprise of roughly 6.7%, on average. The stock is up around 35.3% in a year.
Hawkins has a projected earnings growth rate of 21% for the current year. It currently carries a Zacks Rank #2 (Buy). Hawkins delivered a trailing four-quarter earnings surprise of roughly 27.5%, on average. HWKN shares are up around 84.7% in a year.
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