ESAB Corporation Announces Upsizing and Pricing of its 6.25% Senior Notes due 2029

Rhea-AI Summary

ESAB announced the pricing of $700 million aggregate principal amount of 6.25% Senior Notes due 2029, increasing from the initial $600 million. The proceeds will repay borrowings under its senior term loan A-3 facility, with the rest for general corporate purposes. The offering is expected to close on April 9, 2024. The Notes are not registered under the Securities Act of 1933 and may only be offered to qualified institutional buyers under Rule 144A or certain persons outside the United States under Regulation S.

Insights

Financial Analyst

The decision by ESAB Corporation to increase the aggregate principal amount of its Senior Notes offering from $600 million to $700 million is a significant financial move. This adjustment indicates a robust demand for the company's debt instruments, which could be interpreted as a positive signal by the market about the company's creditworthiness and investor confidence. The 6.25% interest rate on the Senior Notes, which are due in 2029, is relatively high, suggesting that investors are being compensated for taking on a higher risk associated with the company's long-term debt.

Investors and analysts will be evaluating the impact of this debt issuance on ESAB's leverage ratios and interest coverage metrics. The use of proceeds to repay existing debt under its senior term loan A-3 facility may improve the company's debt maturity profile and potentially lower its overall cost of capital. However, the increment in the principal amount could also imply a higher interest expense going forward, which would need to be covered by the company's operational cash flows. It's critical to assess whether the company's financial performance can sustain this additional debt without compromising its financial stability.

Legal Expert

The legal framework surrounding the offering of the Senior Notes by ESAB is notable for its reliance on exemptions from registration under the Securities Act of 1933. The use of Rule 144A allows ESAB to target qualified institutional buyers, a group that typically has the expertise and financial capability to invest in securities not registered with the SEC. Meanwhile, Regulation S facilitates the sale of these securities outside the United States.

It's essential for potential investors to understand the implications of these securities not being registered under the Securities Act. The lack of registration restricts the resale of the Notes, which could impact their liquidity and, consequently, their market value. Furthermore, the guarantees by certain domestic subsidiaries serve as an additional layer of security for the investors, potentially making the Notes more attractive despite the restrictions on their sale.

Market Research Analyst

In the context of the broader market, ESAB's move to issue $700 million in Senior Notes may reflect underlying industry trends or the company's strategic initiatives. The industrial compounding sector often requires significant capital for operations and expansion and companies frequently resort to the debt markets for funding. The decision to allocate the remainder of the proceeds for general corporate purposes could indicate planned investments in growth or innovation, which may be a response to competitive pressures or opportunities identified by the company's management.

Given the current economic climate, characterized by rising interest rates, the fixed rate of 6.25% could be advantageous if rates continue to climb. However, it could also be a burden if rates stabilize or decrease. This issuance could affect the company's stock performance, depending on how investors perceive the use of debt proceeds and the company's ability to manage its increased debt load while pursuing profitable growth.

NORTH BETHESDA, Md.--(BUSINESS WIRE)-- ESAB Corporation (“ESAB” or the “Company”) (NYSE: ESAB), a focused premier industrial compounder, announced today the pricing of its previously announced offering of $700 million aggregate principal amount of 6.25% Senior Notes due 2029 (the “Notes”). The aggregate principal amount of Notes to be issued in the offering was increased to $700 million from the previously announced amount of $600 million. ESAB intends to use the net proceeds from the sale of the Notes to repay the outstanding borrowings under its senior term loan A-3 facility, with the remainder to be used for general corporate purposes. The Notes will be guaranteed (the “Guarantees”) by certain of ESAB’s domestic subsidiaries. The offering is expected to close on April 9, 2024, subject to customary closing conditions.

The Notes and the related Guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any other jurisdiction. As a result, the Notes and the related Guarantees may not be offered or sold within the United States to or for the account or benefit of any U.S. person unless the offer or sale would qualify for a registration exemption under the Securities Act and applicable state securities laws. Accordingly, the Notes and the related Guarantees are being offered only to a limited number of U.S. investors that ESAB reasonably believes to be qualified institutional buyers in accordance with Rule 144A under the Securities Act, and to certain persons outside the United States in accordance with Regulation S under the Securities Act.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of the Notes or the related Guarantees in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. This press release contains information about the pending offering of the Notes, and there can be no assurance that the offering will be completed.

About ESAB Corporation

Founded in 1904, ESAB Corporation (NYSE: ESAB) is a focused premier industrial compounder. The Company’s rich history of innovative products, workflow solutions and business system ESAB Business Excellence, enables its purpose of Shaping the World We Imagine^TM. ESAB Corporation is based in North Bethesda, Maryland and employs approximately 9,000 associates and serves customers in approximately 150 countries.

CAUTIONARY NOTE CONCERNING FORWARD LOOKING STATEMENTS

This press release includes forward-looking statements, including forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning the completion of the offering of the Notes and the use of the net proceeds therefrom, and other statements that are not historical or current fact. Forward-looking statements are based on the Company’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements, including general risks and uncertainties such as market conditions, economic conditions, geopolitical events, changes in laws, regulations or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters or other disruptions of expected business conditions. Factors that could cause the Company’s results to differ materially from current expectations include, but are not limited to, risks related to the Company’s ability to operate as a stand-alone public company; the Company’s ability to achieve the intended benefits from the Company’s separation from Enovis Corporation; the impact of the war in Ukraine and escalating geopolitical tensions; impact of supply chain disruptions; the impact on creditworthiness and financial viability of customers; other impacts on the Company’s business and ability to execute business continuity plans; and the other factors detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 29, 2024, as well as other risks discussed in the Company’s filings with the SEC. In addition, these statements are based on assumptions that are subject to change. This press release speaks only as of the date hereof. The Company disclaims any duty to update the information herein.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240325272182/en/

Investor Relations Contact

Mark Barbalato

Vice President, Investor Relations

E-mail: investorrelations@esab.com

Phone: 1-301-323-9098

Media Contact

Tilea Coleman

Vice President, Corporate Communications

E-mail: mediarelations@esab.com

Phone: 1-301-323-9092

Source: ESAB Corporation

FAQ

What is the principal amount of the Senior Notes offered by ESAB?

ESAB announced the pricing of $700 million aggregate principal amount of 6.25% Senior Notes due 2029.

When is the offering of the Senior Notes expected to close?

The offering of the Senior Notes is expected to close on April 9, 2024.

Are the Notes guaranteed by any subsidiaries of ESAB?

The Notes will be guaranteed by certain of ESAB’s domestic subsidiaries.

Under which regulations are the Notes being offered to U.S. investors?

The Notes are being offered to qualified institutional buyers under Rule 144A or certain persons outside the United States under Regulation S.