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CASE STUDY: Wheeler-Dealer Iochpe Maxion Rolls Out a US$275mn Syndicated Loan

In the Summer of 2016, automotive wheel producer Iochpe Maxion led by example to become one of the few Brazilian corporates to tap the dollar denominated syndicated loan market with a US$275mn dual-tranche term loan facility that was 43% oversubscribed.

Jun 20, 2017 // 1:48PM

Deal At A Glance

Deal Type: Secured Term Loan Facility

Deal Structure: Dual Tranche

Issuer: Iochpe Holdings, LLC

Deal Size: US$275mn – Tranche a) US$150mn Tranche b) US$125mn

Issue Date: June 2016

Tenor: Tranche a) 5 years Tranche b) 3 years

Price: Average 6MLIBOR+5.44%

Governing Law: New York

Location: Brazil

Bookrunner: Itaú BBA

Lead Arrangers: Confidential

Legal Adviser to JLMs / Bookrunners: Confidential

Legal Adviser to Issuer: Confidential

Use of Proceeds: Refinancing

 

Background

A worldwide leader in the auto-parts industry, Iochepe Maxion is present in 14 countries and sees up to 80% of its revenues come from outside Brazil

On 14 June 2016, the parent’s subsidiary Iochpe Holdings, LLC raised a syndicated loan, involving seven banks, amounting to US$275mn, successfully lengthening its debt profile and refinancing some of its real-denominated debt with US dollar debt.

The deal closed successfully despite the challenging market landscape for high-yield borrowers, especially amid growing political and macroeconomic concerns and a reduced appetite of foreign banks.

Transaction Breakdown

In June 2016 Iochepe Maxion became one of the first Brazilian companies to tap the syndicated loan market. The company assigned Itau BBA as mandated lead arranger and sole bookrunner in a dual-tranche syndication.

Seven international and Brazilian banks took part in the syndication of the US$275mn loan.

Its subsidiary, Iochpe Holdings, LLC raised the syndicated loan with average rate of 5.44% plus six-month Libor, divided into two tranches. Tranche A (US$150mn) carries maturity in June 2021 and a two-year grace period, with a portion earmarked for early redemption of the Company’s 5th Issue Debentures. Tranche B (US$125mn) carries a maturity of June 2019 and a two-year grace period, with amounts earmarked for payment of the Company’s short-term loans.

The syndication, which was conducted partially on a firm underwritten basis and partially on a best efforts basis, was successfully concluded with a 43% oversubscription, allowing the transaction amount to be increased from US$250mn to US$275mn.

The proceeds were used to extend the company’s maturity profile and replace Brazilian real debt for US dollar debt, given Iochpe’s increased revenues in foreign currencies. The transaction also allowed the Company to reduce its overall cost of debt.



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