Building materials producer Owens Corning priced a US$2bn three-part bond on Wednesday to refinance term loans that were used to clinch its recent US$3.9bn purchase of doormaker Masonite International, giving investors a rare opportunity to gain exposure to an infrequent borrower.
Owens' last foray into the primary US corporate bond market was in the form of a US$300m 10-year offering in 2020.
Active leads for today's offering were Wells Fargo, Bank of America, Citigroup and Morgan Stanley. The Baa1/BBB/BBB rated trade comprised US$500m three-year, US$800m 10-year and US$700m 30-year senior unsecured notes.
Bookrunners priced the trade at US Treasuries plus 70bp, 112.5bp and 130bp, respectively. The tranches tightened 25bp–30bp from IPTs despite the negative tone in equities and corporate credit today.
That price progression is in line with where analysts were expecting the bonds to land. CreditSights said fair value for the three and 10-year bonds was 20bp inside of IPTs, and 30bp tighter for the 30-year tranche.
To close the acquisition of the doormaker on May 15 Owens Corning drew US$2.8bn from a term loan and US$295m from a trade receivables securitization program, a financing source backed by the company's invoices.
Together, Masonite and Owens Corning produced close to US$1.5bn of free cash flow in 2023, giving the company ample flexibility to bring down leverage following the purchase. Fitch estimates leverage of 2.3x Ebitda at the end of this year for the combined company.
The limited leverage will help Owens Corning navigate an uncertain business backdrop for homebuilders, said Fitch, as high interest rates keep a lid on new home construction.
As part of the acquisition, Owens Corning is clearing out the old Masonite debt from the combined entity's balance sheet.
The company completed a tender offer for most of Masonite's US$500m of 5.375% 2028 senior notes. Owens Corning has also commenced an exchange offer for Masonite's existing US$375m 3.5% 2030s, which investors can accept for a new 3.5% 2030 note from the company.