Worthington Steel Announces \$700 Million Senior Secured Notes Offering to Fund Kloeckner Acquisition
Key Points from the Announcement
- Worthington Steel, Inc. (NYSE: WS) has priced a \$700 million offering of 7.750% senior secured notes due 2033.
- The offering size was reduced from \$900 million to \$700 million, while the associated term loan credit facility was increased from \$500 million to \$700 million.
- Proceeds from the offering and a new term loan will primarily fund the acquisition of Kloeckner & Co SE, as well as related costs and debt repayments.
- The Kloeckner Acquisition is expected to close on June 3, 2026, just days after the notes offering closes.
- The notes will be fully and unconditionally guaranteed by Worthington Steel’s restricted subsidiaries and secured by liens on substantially all assets of Worthington Steel and the guarantors.
- If the acquisition does not close by March 12, 2027 (or within ten business days thereafter in certain circumstances), the notes will be subject to a mandatory redemption at 100% of issue price plus accrued interest.
- The notes and guarantees are not registered under the Securities Act and will be offered only to qualified institutional buyers and non-U.S. persons.
Details Investors and Shareholders Need to Know
- Use of Proceeds: Proceeds from the notes, together with the term loan, will be used to:
- Fund the consideration and payments for the Kloeckner Acquisition
- Support loans to Kloeckner under a shareholder loan
- Buy out remaining minority shareholders of Kloeckner
- Pay transaction fees and expenses
- Repay certain existing debts of Worthington Steel and Kloeckner
- Provide working capital for Worthington Steel and its subsidiaries
- Notable Structural Changes: The reduction in note size and corresponding increase in the term loan alters the company’s capital structure and may affect leverage and liquidity profiles.
- Security and Guarantees: The notes are high-priority debt, backed by liens on nearly all assets, which may impact future financing flexibility.
- Mandatory Redemption Provision: If the Kloeckner deal collapses or is not completed by a certain date, investors in the notes are protected by a mandatory redemption clause.
- Risks and Uncertainties: The deal is still subject to regulatory approval and closing conditions. There are risks associated with integrating Kloeckner, achieving expected synergies, and potential impacts on future financial performance and relationships with stakeholders.
- Forward-Looking Statements: The company highlights substantial risks that could cause actual results to differ, including regulatory, market, operational, and integration risks.
Potential Share Price Impact
The announcement is highly price-sensitive and could impact Worthington Steel’s stock value for several reasons:
- Execution Risk: The successful closing of the Kloeckner Acquisition is critical. Any delay or failure could significantly affect the company’s growth prospects and leverage profile.
- Capital Structure Adjustment: The reduction in the bond offering and increase in term loans may affect perceptions of risk, cost of capital, and future flexibility.
- Synergy and Integration: The acquisition is expected to deliver cost and operational synergies, but failure to realize these could negatively affect earnings and valuation.
- Debt Load: The combined company will carry significant new debt, which could impact credit ratings, interest expenses, and risk profile.
- Redemption Risk: The mandatory redemption clause provides some downside protection for bondholders but also highlights the uncertainty around deal completion.
About Worthington Steel
Worthington Steel is recognized as one of North America’s premier value-added metals processors, serving a broad range of end markets with a diversified product suite and services.
Contact Information
U.S. Media/Investor Relations:
Melissa Dykstra, Vice President, Corporate Communications and Investor Relations
Phone: 614-840-4144
Email: [email protected]
European Media Contact:
Julia Klostermann, Director, Brunswick Group
Phone: +49 174-740-2796
Email: [email protected]
Disclaimer
This article is for informational purposes only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any securities. Investors should consider all publicly available information and consult with their financial advisors before making investment decisions. Worthington Steel’s forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied.
