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DEAL OF THE YEAR: Syndicated Loan

Jan 1, 2013

Ternium $700m 5-year Loan

Steelmaker Ternium’s purchase of $2.7 billion of shares in Brazil’s Usinas Siderúrgicas de Minas Gerais (Usiminas) was nothing if not challenging: it called for funding to be put together in a volatile climate for a borrower in Luxembourg, a parent in Argentina and a target in Brazil.

Ternium Investments and its affiliates agreed in November to pay $2.2 billion for 27.7% of Usiminas’ ordinary shares, with the Ternium unit putting in $1.5 billion in cash. The price was a hefty premium to enter Brazil. The loan was executed through Ternium Investments’ subsidiary Ternium Investment Sàrl.

The $700 million five-year amortizing senior unsecured loan had to be put together the day before Christmas so as to be able to fund the first week of 2012. The global coordinators pre-funded the transaction in early January ahead of the bank meetings.

It went out to syndication in a difficult environment for banks, in one of the first deals since the European debt crisis exploded.

"European banks were in a delicate state at the end of the year," Jean-Philippe Adam, head of loan syndications at Crédit Agricole, global coordinator on the transaction with Citi, HSBC and JPMorgan.

"It was a very important acquisition for the region and for the client," says Rodrigo Gracia, executive director at JPMorgan. That the acquisition was done with cash made the story even more compelling because it was unsecured and sold without guarantees. That the contribution of the borrower’s own capital toward the Usiminas purchase was 68%, well above the 20%-30% standards, made the deal easier to accept.

The facility pays Libor plus 337.5 basis points. Santander and Mizuho were joint bookrunners, with Intesa Sanpaolo, Inbursa and Natixis as mandated lead arrangers. Bank of Tokyo-Mitsubishi, CorpBanca, and UniCredit were arrangers. Inbursa, Bank of Tokyo and Corpbanca were new lenders to the borrower. The deal was oversubscribed by 50%.

Ternium’s buy-in to Usiminas’ controlling group helped thwart a takeover by Brazilian steel producer CSN. Ternium acquired 84.7 million common shares, its Siderar unit 30 million and fellow Techint Group company TenarisConfab 25 million. In the future, the steelmaker will focus on expansion in a high-growth market.

"It was the most compelling and best story for 2012," Gracia says. "They have a good story in the region and the leverage out of that to continue with their strategy and to continue bringing banks into their transactions." LF



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