PHINIA Announces Proposed Private Offering of $425,000,000 of Senior Secured Notes Due 2029

Rhea-AI Summary

PHINIA Inc. announces a private offering of $425 million senior secured notes due 2029 to repay existing borrowings and cover expenses.

Financial Analyst

The decision by PHINIA Inc. to issue $425 million in senior secured notes due 2029 is a strategic financial move. By opting to repay outstanding borrowings under its term loan B facility, the company is likely aiming to restructure its debt profile, potentially reducing interest expenses and extending debt maturities. The use of senior secured notes means that investors will have a first-priority security interest in most of the company's assets, which could make this debt issuance more attractive due to the lower perceived risk. However, this also implies that in the event of financial distress, note holders would be prioritized over other creditors.

From an investor's perspective, the shift from term loan debt to notes may signal confidence by the company's management in its future cash flows, as it suggests a proactive approach to managing liabilities. However, the private nature of the offering, targeting qualified institutional buyers, limits the pool of potential investors. This exclusivity can sometimes lead to more favorable terms for the issuer.

It is essential to monitor the impact of this transaction on the company's leverage ratios and interest coverage, as these are critical indicators of financial health. Additionally, the credit rating of the newly issued notes will be an important factor for investors to consider, as it will affect the cost of debt for PHINIA and indicate the level of risk associated with the investment.

Legal Expert

The offering of senior secured notes by PHINIA Inc. is structured to comply with exemptions from the registration requirements of the Securities Act of 1933. This approach is often used to expedite the process and reduce the regulatory burden associated with public offerings. The reliance on Rule 144A allows the company to sell securities to qualified institutional buyers, a category of investors that are presumed to be sophisticated and in less need of the protection provided by regulatory disclosure requirements.

It is important to note that by not registering the notes under the Securities Act, PHINIA is limiting its potential investor base to those who meet specific criteria, which could affect the liquidity of the notes. Furthermore, the company's statement that the sale of the notes will not occur in jurisdictions where it would be unlawful without registration or qualification under local securities laws is a standard legal disclaimer to mitigate the risk of regulatory infractions.

The securing of the notes with first-priority interests in the company's assets is a common practice to provide assurance to investors, but it also necessitates a detailed understanding of the collateral package, including any excluded assets or permitted liens, to fully assess the security's value.

Market Research Analyst

PHINIA Inc.'s entry into the private debt market with a substantial offering of $425 million senior secured notes could be indicative of broader market trends. In recent times, private debt offerings have become more prevalent as companies seek alternative financing sources to traditional bank loans or public debt markets. This trend is often driven by the search for more flexible terms and the ability to tailor agreements to the specific needs of the company and the investors.

The attractiveness of this offering to qualified institutional buyers will likely be influenced by the prevailing interest rate environment and the appetite for corporate debt with similar risk profiles. The market's reception of this offering could provide insights into investor sentiment towards the sector in which PHINIA operates, as well as the current demand for fixed-income securities.

Analyzing the sector-specific dynamics, including competitor financing strategies and the historical performance of similar debt issuances, could offer valuable context for understanding the potential success of this offering and its impact on PHINIA's financial positioning.

AUBURN HILLS, Mich.--(BUSINESS WIRE)-- PHINIA Inc. (“PHINIA” or the “Company”) (NYSE: PHIN) announced today that it is planning, subject to market and other customary conditions, to offer (the “Offering”) $425 million aggregate principal amount of its senior secured notes due 2029 (the “notes”) in a private offering that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).

The notes will be guaranteed by each of the Company’s subsidiaries that guarantees its credit facilities. The notes and the guarantees will be secured by first-priority security interests in substantially all of the Company’s and the guarantors’ assets, subject to certain excluded assets, exceptions and permitted liens, which security interests will rank equally with the security interests securing its credit facilities.

The Company intends to use the net proceeds of the Offering to repay all of its outstanding borrowings under its term loan B facility and to pay a portion of the fees and expenses in connection with the Offering.

The notes have not been and will not be registered under the Securities Act or any state securities laws, and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from such registration requirements. Accordingly, the notes are being offered and sold only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act.

This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of, the notes in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical fact that provide current expectations or forecasts of future events based on certain assumptions and are not guarantees of future performance. Forward-looking statements use words such as “anticipate,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “likely,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or other words of similar meaning.

Forward-looking statements, particularly those relating to the Offering of the notes, the use of proceeds therefrom, the expected closing date of the Offering and the ability to successfully complete the Offering within the expected time frame or at all, are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and which could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements. Risks, uncertainties, and factors that could cause actual results to differ materially from those implied by these forward-looking statements include, but are not limited to: adverse changes in general business and economic conditions, including recessions, adverse market conditions or downturns impacting the vehicle and industrial equipment industries; our ability to deliver new products, services and technologies in response to changing consumer preferences, increased regulation of greenhouse gas emissions, and acceleration of the market for electric vehicles; competitive industry conditions; failure to identify, consummate, effectively integrate or realize the expected benefits from acquisitions or partnerships; pricing pressures from original equipment manufacturers (“OEMs”); inflation rates and volatility in the costs of commodities used in the production of our products; changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international trade relations; our ability to protect our intellectual property; failure of or disruption in our information technology infrastructure, including a disruption related to cybersecurity; our ability to identify, attract, retain and develop a qualified global workforce; difficulties launching new vehicle programs; failure to achieve the anticipated savings and benefits from restructuring and product portfolio optimization actions; extraordinary events (including natural disasters or extreme weather events), political disruptions, terrorist attacks, pandemics or other public health crises, and acts of war; risks related to our international operations; the impact of economic, political, and market conditions on our business in China; our reliance on a limited number of OEM customers; supply chain disruptions; work stoppages, production shutdowns and similar events or conditions; governmental investigations and related proceedings regarding vehicle emissions standards; current and future environmental and health and safety laws and regulations; the impact of climate change and regulations related to climate change; liabilities related to product warranties, litigation and other claims; compliance with legislation, regulations, and policies, investigations and legal proceedings, and new interpretations of existing rules and regulations; tax audits and changes in tax laws or tax rates taken by taxing authorities; volatility in the credit market environment; impairment charges on goodwill and indefinite-lived intangible assets; the impact of changes in interest rates and asset returns on our pension funding obligations; the impact of restrictive credit agreement covenants and requirements on our financial and operating flexibility; our ability to achieve some or all of the benefits that we expect to achieve from our spin-off from BorgWarner Inc. (the “Spin-Off”); other risks relating to the Spin-Off, including a delay or inability to transition key infrastructure, services and solutions, a determination that the Spin-Off does not qualify as tax-free for U.S. federal income tax purposes, restrictions under the tax matters agreement between us and BorgWarner Inc. executed in connection with the Spin-Off, and our or BorgWarner Inc.’s failure to perform under various transaction agreements executed in connection with the Spin-Off; and other risks and uncertainties described in our reports filed from time to time with the Securities and Exchange Commission.

We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240325292098/en/

IR contact:

Gordon Muir

Vice President and Treasurer

investor@phinia.com

+1 574-210-5713

Media contact:

Kevin Price

Global Brand & Communications Director

media@phinia.com

+44 (0) 7795 463871

Source: PHINIA INC

FAQ

What is PHINIA Inc. planning to offer in the private offering?

PHINIA Inc. is planning to offer $425 million aggregate principal amount of its senior secured notes due 2029.

How will the net proceeds of the offering be utilized?

The net proceeds of the offering will be used to repay all of PHINIA Inc.'s outstanding borrowings under its term loan B facility and to pay a portion of the fees and expenses related to the offering.

Are the notes being offered registered under the Securities Act?

No, the notes have not been and will not be registered under the Securities Act or any state securities laws.

Who can purchase the notes in this offering?

The notes are being offered and sold only to qualified institutional buyers under Rule 144A and to certain non-U.S. persons under Regulation S.