Arcosa secures credit facility amendment for acquisition

Dallas-based Arcosa (NYSE:ACA), Inc., a manufacturer of fabricated structural metal products, has amended its existing credit agreement to facilitate a significant acquisition. The company announced on Monday that it entered into Amendment No. 1 to its Second Amended and Restated Credit Agreement to support the $1.2 billion cash acquisition of Stavola Holding Corporation's construction materials business.

The amendment, dated August 15, 2024, allows for the consummation of the transaction and the issuance of $600.0 million in 6.875% senior unsecured notes due 2032. Additionally, it provides for a new senior secured Term Loan B Facility due 2031 of up to $700.0 million, with the potential to increase the revolving commitments from $600.0 million to $700.0 million.

Under the amended credit agreement, the term loan will have a variable interest rate based on the Secured Overnight Financing Rate (SOFR) plus 2.25% per annum or an alternate base rate plus 1.25% per annum. Arcosa will be required to make quarterly principal payments and annual excess cash flow prepayments, with the balance due on the seventh anniversary of the initial funding.

The amendment also stipulates that Arcosa's and its subsidiary guarantors’ personal property, with certain exceptions, will serve as collateral securing obligations under the credit agreement. This includes cash management and hedging obligations.

The net proceeds from the term loan, along with the proceeds from the senior unsecured notes, are intended to finance the acquisition and cover related fees and expenses. Any remaining funds may be used to repay borrowings under the revolving credit facility.

The credit facility amendment is contingent upon the satisfaction of certain conditions, including the closing of the acquisition. Arcosa's management has confirmed that the transaction is in line with their strategic growth objectives.

In other recent news, Arcosa Inc. has reported strong financial results, with record quarterly revenues increasing by 14% and adjusted EBITDA increasing by 31%. The company has announced the pricing of a private offering of $600 million in senior notes due in 2032, part of the funding strategy for its $1.2 billion acquisition of the construction materials business from Stavola Holding Corporation.

Additionally, Arcosa plans to secure a senior secured Term Loan B Facility worth up to $700 million, maturing in 2031, to fund the Stavola acquisition.

Oppenheimer has maintained an Outperform rating on Arcosa, while increasing the shares target to $105. The firm recognizes significant changes in the company's structure due to recent acquisitions and divestitures, positioning Arcosa for higher growth and margins.

Similarly, Loop Capital has increased its stock price target for Arcosa Inc. shares to $110, maintaining a Buy rating on the stock. These updates follow Arcosa's raised EBITDA guidance, the acquisition of Stavola, and the divestiture of its steel components business.

Arcosa has also divested its steel components business to Stellex Capital Management, a move expected to enhance the growth of the acquired companies. These recent developments underline Arcosa's strategic focus on deleveraging, organic growth, and efficiency improvements.

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