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Carpenter Closes $500M Credit Facility

JPM CRS BAC

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Specialty alloys maker Carpenter Technology Corporation (CRS - Snapshot Report) has successfully completed the $500 million syndicated credit facility. This five-year credit facility replaces the previous $350 million revolver, which was due to expire in Jun, 2016.

The terms and conditions of the new facility are mostly similar to the previous agreement. Debt to capital ratio and interest coverage ratio, the two financial covenants, are likely to remain the same.

However, pricing was enhanced with a 15 basis point Commitment Fee replacing the prior 20 basis point Facility Fee. This led to a reduction in the all-in drawn fee by 15 basis points at the prevailing rating level.

A syndicate of ten lenders offered loan for this new facility and was oversubscribed before the actual allocations started. This new credit facility adds to Carpenter’s overall growth strategy by contributing to its financial structure.

The joint lead arrangers for the credit facility are J.P. Morgan Securities LLC, the non-bank subsidiary of JPMorgan Chase & Co. (JPM - Analyst Report), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned subsidiary of Bank of America Corporation (BAC - Analyst Report).

Carpenter Technology, a major player in the specialty steel industry along with Sutor Technology Group Limited , posted adjusted earnings (excluding special items) of 69 cents per share for third-quarter fiscal 2013 (ended Dec 31, 2012). Reported earnings dropped from 84 cents a share recorded in the year-ago quarter and also missed the Zacks Consensus Estimate of 76 cents.

Profit decreased 0.3% year over year to $32.9 million. Earnings growth attributable to the acquisition of Latrobe was offset by lower SAO earnings as a result of in-quarter mix degradation, increased deferrals and related loss of manufacturing overhead cost absorption.

Revenues rose 7.68% year over year to $581.4 million in the reported quarter. However, it missed the Zacks Consensus Estimate of $636 million. Barring surcharge revenues, sales grew by 12% or $52.2 million year over year owing to the inclusion of Latrobez.

Sales were hurt by increased customer deferrals during the quarter, combined with low sales to distribution customers and a weak defense related mix. However, significant growth is achieved in the aerospace and energy markets.

Carpenter expects full year 2013 earnings to be lower than the earlier projection due to the recent pattern of slower customer deferrals and increased intake of orders. The company continues to see low double-digit growth in operating income for fiscal 2013. However, it noted that achieving this target will be difficult if the fourth quarter experiences similar in-quarter mix and deferrals as witnessed in the third quarter.

Carpenter currently retains a Zacks Rank #4 (Sell).
 

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