Arcosa, Inc. Announces Pricing of $600 Million of 6.875% Senior Notes Due 2032

Rhea-AI Summary

Arcosa, Inc. (NYSE: ACA) has announced the pricing of a $600 million private offering of 6.875% senior notes due 2032. The offering is expected to close on August 26, 2024, subject to customary conditions. The net proceeds, along with borrowings from a Term Loan B Facility, will be used to fund the $1.2 billion acquisition of Stavola Holding 's construction materials business. Any remaining funds will repay outstanding amounts on Arcosa's revolving credit facility.

The notes will be senior unsecured obligations, initially guaranteed by Arcosa's domestic subsidiaries that are guarantors under its senior credit facility. They are being offered only to qualified institutional buyers and non-U.S. persons, and are not registered under the Securities Act.

Positive

• Successful pricing of $600 million senior notes offering
• Funding secured for $1.2 billion acquisition of Stavola Holding 's construction materials business
• Potential expansion in the construction materials sector through acquisition

Negative

• Increase in long-term debt with 6.875% interest rate
• Potential dilution of existing shareholders' value due to significant acquisition
• Risk associated with special mandatory redemption if the acquisition is not completed within the specified timeframe

Financial Analyst

This $600 million senior notes offering by Arcosa is a significant move to finance their $1.2 billion acquisition of Stavola Holding 's construction materials business. The 6.875% interest rate for these 2032 notes is relatively high, reflecting current market conditions and potentially the company's risk profile. This debt issuance, combined with a Term Loan B, shows Arcosa's aggressive expansion strategy in the construction materials sector.

The special mandatory redemption clause tied to the acquisition's completion adds a layer of investor protection. However, the increased debt load could impact Arcosa's financial flexibility and interest coverage ratios. Investors should closely monitor the company's ability to integrate the acquired business and generate sufficient cash flows to service this new debt.

Legal Expert

The private offering structure under Rule 144A and Regulation S exemptions is a common approach for expedited capital raising without the extensive SEC registration process. This strategy allows Arcosa to access capital markets quickly but limits the initial investor base to qualified institutional buyers and certain non-U.S. persons.

The senior unsecured nature of the notes, backed by subsidiary guarantees, provides some comfort to investors but ranks behind secured debt in the capital structure. The special mandatory redemption provision is a key legal safeguard, ensuring investors are protected if the acquisition falls through. However, investors should be aware that these notes lack the broad protections and liquidity of registered securities.

Market Research Analyst

Arcosa's move to acquire Stavola's construction materials business for $1.2 billion signals a strong bet on the infrastructure and construction sectors. This aligns with expected increased government spending on infrastructure projects. The high-yield bond issuance at 6.875% reflects both the current interest rate environment and investor appetite for yield.

The transaction could potentially strengthen Arcosa's market position in construction materials, but integration risks and cyclical nature of the industry remain concerns. Investors should watch for synergies, market share gains and how this acquisition impacts Arcosa's overall business mix and geographical footprint. The success of this deal could influence Arcosa's future growth trajectory and stock performance.

DALLAS, Texas--(BUSINESS WIRE)-- Arcosa, Inc. (NYSE: ACA) (“Arcosa”) today announced the pricing of its previously announced private offering of $600.0 million aggregate principal amount of 6.875% senior notes due 2032 (the “Notes”). The Notes offering is expected to close on August 26, 2024, subject to customary conditions.

Arcosa intends to use the net proceeds from the offering, together with expected borrowings under the previously announced Term Loan B Facility due 2031, to fund the $1.2 billion purchase price of the previously announced acquisition of the construction materials business of Stavola Holding Corporation and its affiliated entities (the “Transaction”) and to use any remaining net proceeds to repay amounts outstanding under Arcosa’s revolving credit facility.

The Notes will be senior unsecured obligations of Arcosa and will initially be guaranteed on a senior unsecured basis by each of Arcosa’s domestic subsidiaries that is a guarantor under its senior credit facility.

The Notes will be subject to a special mandatory redemption if the Transaction is not consummated on or before the timeframe set forth in the indenture governing the Notes.

The Notes and the related guarantees are being offered and sold only to persons reasonably believed to be “qualified institutional buyers” in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to certain non-U.S. persons in compliance with Regulation S under the Securities Act. The Notes and the related guarantees have not been and will not be registered for sale under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

This press release shall not constitute an offer to sell, or a solicitation of an offer to buy, the Notes or any other securities, and shall not constitute an offer to sell, solicitation of an offer to buy, or sale of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any offers of the Notes will be made only by means of a private offering memorandum.

About Arcosa

Arcosa, Inc., headquartered in Dallas, Texas, is a provider of infrastructure-related products and solutions with leading positions in construction, engineered structures, and transportation markets. Arcosa reports its financial results in three principal business segments: Construction Products, Engineered Structures, and Transportation Products. For more information, visit www.arcosa.com.

Cautionary Statements About Forward-Looking Information

Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Arcosa’s estimates, expectations, beliefs, intentions or strategies for the future. Arcosa uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “outlook,” “strategy,” “plans,” “goal” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Arcosa expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, except as required by federal securities laws. Forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations, including but not limited to, statements regarding the anticipated consummation of the offering, the intended use of offering proceeds, the anticipated terms of the securities described herein, other aspects of the offering, the contingencies related to the special mandatory redemption, the failure to successfully complete and integrate acquisitions, including the Transaction, or divest any business, or failure to achieve the expected benefits of acquisitions or divestitures; market conditions and customer demand for Arcosa’s business products and services; the cyclical nature of, and seasonal or weather impact on, the industries in which Arcosa competes; competition and other competitive factors; governmental and regulatory factors; changing technologies; availability of growth opportunities; market recovery; ability to improve margins; the impact of inflation and costs of materials; assumptions regarding achievements of the expected benefits from the Inflation Reduction Act; the delivery or satisfaction of any backlog or firm orders; the impact of pandemics on Arcosa’s business; and Arcosa’s ability to execute its long-term strategy, and such forward-looking statements are not guarantees of future performance. For further discussion of such risks and uncertainties, see “Risk Factors” and the “Forward-Looking Statements” section of “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Arcosa's Form 10-K for the year ended December 31, 2023 and as may be revised and updated by Arcosa's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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MEDIA CONTACT: media@arcosa.com



INVESTOR CONTACTS

Gail M. Peck

Chief Financial Officer



Erin Drabek

Director of Investor Relations

T 972.942.6500

InvestorResources@arcosa.com



David Gold

ADVISIRY Partners

T 212.661.2220

David.Gold@advisiry.com

Source: Arcosa, Inc.

FAQ

What is the interest rate and maturity of Arcosa's (ACA) new senior notes?

Arcosa (ACA) has priced $600 million of senior notes with an interest rate of 6.875%, maturing in 2032.

How will Arcosa (ACA) use the proceeds from the senior notes offering?

Arcosa (ACA) will use the proceeds, along with Term Loan B borrowings, to fund the $1.2 billion acquisition of Stavola Holding 's construction materials business and repay revolving credit facility debt.

When is the expected closing date for Arcosa's (ACA) senior notes offering?

The senior notes offering for Arcosa (ACA) is expected to close on August 26, 2024, subject to customary conditions.

Are Arcosa's (ACA) new senior notes registered under the Securities Act?

No, Arcosa's (ACA) new senior notes are not registered under the Securities Act and are being offered only to qualified institutional buyers and non-U.S. persons.