GFL Environmental Inc. Announces Proposed Private Offering of Senior Notes

Rhea-AI Summary

GFL Environmental announced plans for a private offering of US$500 million in senior notes due 2032. The proceeds will be used to redeem the company's existing US$500 million 4.250% Senior Secured Notes due 2025, along with related fees and interest. The new notes will be issued by a US subsidiary and guaranteed by GFL and certain other subsidiaries. The company aims to shift more debt from secured to unsecured, extend debt maturities, and maintain balance sheet flexibility. The refinancing is expected to be leverage neutral, with incremental interest expenses offset by cash tax savings, making a minimal impact on free cash flow.

Positive

• US$500 million in senior notes due 2032 aiming to refinance existing notes.
• Proceeds will redeem US$500 million 4.250% Senior Secured Notes due 2025.
• Refinancing expected to be leverage neutral.
• Incremental interest expenses offset by cash tax savings, minimizing impact on free cash flow.
• Extending debt maturities and maintaining balance sheet flexibility.
• Move from secured to unsecured debt consistent with an investment grade capital structure.

Negative

• The Notes Offering is subject to market and other conditions.
• The new notes are not registered under the Securities Act and have sale conditions.
• Potential risks related to market conditions affecting the offering.

Insights

Financial Analyst

GFL Environmental Inc.'s plan to issue $500 million in senior notes to refinance existing debt is a noteworthy move in their financial strategy. By shifting from secured to unsecured debt, GFL aims to align more closely with an investment-grade capital structure. This strategic maneuver enhances their balance sheet flexibility and extends debt maturities, which is beneficial for long-term financial health. The refinancing of their 2025 Secured Notes is estimated to be leverage neutral, indicating that it won't affect the company's overall debt level. While there may be an incremental increase in interest expense due to this move, GFL expects to offset this with cash tax savings, leading to a negligible impact on their free cash flow.

From a retail investor's perspective, these senior notes being placed privately mean that direct investment in them is not an option. However, the decision to refinance can be seen as a signal of GFL's proactive management approach towards their debt, which can be interpreted as a positive sign for the company's stability and risk profile.

Credit Market Specialist

Private offerings of senior notes, especially when targeting a specific amount like $500 million, can be indicative of a company's attempt to attract institutional investors. The shift from secured to unsecured debt means that GFL is potentially betting on its creditworthiness improvement, striving for more favorable terms in unsecured debt markets. It is an important aspect for credit markets as it signifies the company's confidence in its future cash flows and financial discipline. Typically, senior secured notes are backed by collateral, which provides a safety net for investors, while unsecured notes do not have this backing, reflecting higher trust in the company's credit standing.

For retail investors, understanding this shift is crucial. It suggests a potential decrease in perceived default risk, aligning with a trajectory towards an investment-grade rating. This move should instill some confidence, although it's important to monitor how market conditions and the company's financial performance evolve.

VAUGHAN, ON, June 6, 2024 /PRNewswire/ - GFL Environmental Inc. (NYSE: GFL) (TSX: GFL) ("GFL") today announced that it is planning to commence, subject to market and other conditions, a private offering of US$500 million in aggregate principal amount of senior notes due 2032 (the "Notes"). GFL intends to use the net proceeds from the offering of the Notes (the "Notes Offering"), together with cash on hand, to redeem all of GFL's outstanding US$500 million aggregate principal amount of 4.250% Senior Secured Notes due 2025 (the "2025 Secured Notes") and to pay related fees, premiums and accrued and unpaid interest on the 2025 Secured Notes. The Notes will be issued by a U.S. wholly owned subsidiary of GFL and will be guaranteed by GFL and certain of its other subsidiaries.

GFL is opportunistically pursuing the Notes Offering, with a view to moving more of its debt from secured to unsecured, consistent with an investment grade capital structure, extending its related debt maturities and preserving balance sheet flexibility. The refinancing of the 2025 Secured Notes is expected to be leverage neutral. In addition, it is expected that any incremental interest expense incurred as a result of the Notes Offering will be offset by cash tax savings, resulting in an immaterial impact to GFL's free cash flow.

The Notes being offered in the Notes Offering have not been, and will not be, registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Notes are being offered only to qualified institutional buyers under Rule 144A and outside the United States in compliance with Regulation S under the Securities Act. In Canada, the Notes are to be offered and sold on a private placement basis in certain provinces of Canada.

This release shall not constitute an offer to sell or a solicitation of an offer to buy any security, nor shall there be any offer, solicitation or sale of any security in any state or jurisdiction in which such an offer, solicitation, or sale would be unlawful.

About GFL

GFL, headquartered in Vaughan, Ontario, is the fourth largest diversified environmental services company in North America, providing a comprehensive line of solid waste management, liquid waste management and soil remediation services through its platform of facilities throughout Canada and in more than half of the U.S. states. Across its organization, GFL has a workforce of more than 20,000 employees.

Forward-Looking Information

This release includes certain "forward-looking statements", including statements relating to the potential for an offering and issuance of the Notes by GFL and the use of proceeds therefrom. In some cases, but not necessarily in all cases, forward-looking statements can be identified by the use of forward looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking statements. Forward-looking statements are not historical facts, nor guarantees or assurances of future performance but instead represent management's current beliefs, expectations, estimates and projections regarding future events and operating performance. Forward-looking statements are necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by GFL as of the date of this release, are subject to inherent uncertainties, risks and changes in circumstances that may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, the "Risk Factors" section of GFL's annual information form for the year ended December 31, 2023 and GFL's other periodic filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. These factors are not intended to represent a complete list of the factors that could affect GFL. However, such risk factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. You should not place undue reliance on forward-looking statements, which speak only as of the date of this release. GFL undertakes no obligation to publicly update any forward-looking statement, except as required by applicable securities laws.

For more information:
Patrick Dovigi
+1 905-326-0101
pdovigi@gflenv.com

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SOURCE GFL Environmental Inc.

FAQ

What is GFL Environmental's recent financial move regarding senior notes?

GFL Environmental announced a private offering of US$500 million in senior notes due 2032 to refinance existing debt.

How will GFL Environmental use the proceeds from the senior notes offering?

The proceeds will be used to redeem the company's US$500 million 4.250% Senior Secured Notes due 2025 and to cover related fees and interest.

What is the purpose of GFL Environmental's new senior notes offering?

The purpose is to shift more debt from secured to unsecured, extend debt maturities, and maintain balance sheet flexibility.

How will the new senior notes affect GFL Environmental's leverage?

The refinancing is expected to be leverage neutral.

What impact will the new senior notes have on GFL Environmental's free cash flow?

Any incremental interest expenses are expected to be offset by cash tax savings, having a minimal impact on free cash flow.

Are there any restrictions on the sale of GFL Environmental's new senior notes?

Yes, the notes are not registered under the Securities Act and are offered only to qualified institutional buyers and through private placements in Canada.