PHINIA Announces Pricing of Private Offering of $450,000,000 of Senior Notes due 2032

Rhea-AI Summary

PHINIA Inc. (NYSE: PHIN) has successfully priced its private offering of $450 million in unsecured 6.625% senior notes due 2032. This represents an increase from the previously announced $400 million offering. The notes, priced at 100.00% plus accrued interest, are set to close around September 17, 2024. They will be guaranteed by PHINIA's subsidiaries that guarantee its credit facilities and 6.75% senior secured notes due 2029.

The company plans to use the net proceeds to repay all outstanding borrowings under its term loan A facility, cover offering-related fees and expenses, and for general corporate purposes. The notes are being offered only to qualified institutional buyers and certain non-U.S. persons, in compliance with Securities Act exemptions.

Positive

• Successful pricing of $450 million senior notes, increased from initial $400 million offering
• Proceeds will be used to repay outstanding borrowings, potentially improving debt structure
• Notes are guaranteed by subsidiaries, potentially enhancing investor confidence

Negative

• Increased debt load with 6.625% interest rate, potentially impacting future financial flexibility
• Offering to qualified institutional buyers and certain non-U.S. persons, restricting broader market participation

Insights

Financial Analyst

PHINIA's $450 million senior notes offering at 6.625% interest rate signals a strategic move to refinance existing debt and bolster liquidity. The upsized offering from the initial $400 million suggests strong investor demand, reflecting confidence in PHINIA's creditworthiness. The repayment of term loan A with these proceeds could potentially lower overall interest expenses, depending on the previous loan's terms. However, investors should note that while this doesn't immediately impact the balance sheet size, it does extend the debt maturity profile to 2032, providing long-term financial flexibility. The pricing at par value (100%) indicates neutral market perception of PHINIA's credit risk relative to current market conditions.

Legal Expert

The private placement of these notes under Rule 144A and Regulation S exemptions is a common strategy for expedited capital raising without the lengthy SEC registration process. This approach, however, limits the initial investor base to qualified institutional buyers and non-U.S. persons, potentially affecting liquidity in the secondary market. The inclusion of subsidiary guarantees for the notes aligns with PHINIA's existing debt structure, providing additional security for noteholders. Investors should be aware that these notes, being unsecured, rank behind the company's secured obligations in the event of default. The standard disclaimers in the press release serve to comply with securities laws and protect PHINIA from potential legal challenges related to unregistered securities offerings.

Market Research Analyst

PHINIA's successful note offering reflects a broader trend in the auto parts industry of companies seeking to optimize their capital structures amidst rising interest rates and economic uncertainties. The 6.625% coupon rate is competitive in the current high-yield market, suggesting PHINIA's solid market position despite being a recent spin-off. This debt issuance could be seen as a proactive measure to secure long-term financing, possibly anticipating future market volatility or growth opportunities. The strong demand enabling an upsized offering may positively influence investor perception of PHINIA's standalone prospects. However, investors should monitor how effectively PHINIA deploys capital for "general corporate purposes" to ensure it translates into value creation rather than just financial engineering.

AUBURN HILLS, Mich.--(BUSINESS WIRE)-- PHINIA Inc. (“PHINIA,” “we,” “our” or the “Company”) (NYSE: PHIN) announced today that it has priced its previously announced offering (the “Offering”) and has agreed to issue and sell $450 million aggregate principal amount of its unsecured 6.625% senior notes due 2032 (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 aggregate principal amount of the Offering of the notes was increased from the previously announced Offering size of $400 million aggregate principal amount of notes. The notes will be sold to investors at 100.00% plus accrued interest, if any, from September 17, 2024. The closing of the Offering of the notes is expected to occur on or about September 17, 2024, subject to customary closing conditions.

The notes will be guaranteed by each of the Company’s subsidiaries that guarantees its credit facilities and its 6.75% senior secured notes due 2029.

The Company intends to use the net proceeds of the Offering to repay all of its outstanding borrowings under its term loan A facility, to pay fees and expenses in connection with the Offering, and for general corporate purposes.

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 U.S. federal securities laws. 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. and foreign 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, including the ongoing investigation into diesel defeat devices; current and future environmental and health and safety laws and regulations; the impact of climate change and regulations related to climate change, including evolving greenhouse gas emissions regulations in California, the U.S. in general and European Union; liabilities related to product warranties, litigation and other claims; compliance with legislation, regulations, and policies, investigations and legal proceedings, and changes in 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 covenants and requirements in the agreements governing our indebtedness 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 determination that the Spin-Off does not qualify as tax-free for U.S. federal income tax purposes, restrictions and obligations under the tax matters agreement, and our or BorgWarner Inc.’s failure to perform under, and any dispute relating to, the various transaction agreements; our ability to consummate the Offering of the notes; 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.

Category: IR

View source version on businesswire.com: https://www.businesswire.com/news/home/20240910264940/en/

IR contact:

Kellen Ferris

Vice President, Investor Relations

investor@phinia.com

+1 947-262-5256

Media contact:

Kevin Price

Global Brand & Communications Director

media@phinia.com

+44 (0) 7795 463871

Source: PHINIA INC

FAQ

What is the size and interest rate of PHINIA's (PHIN) new senior notes offering?

PHINIA (NYSE: PHIN) has priced a $450 million offering of unsecured senior notes due 2032 with a 6.625% interest rate.

When is the expected closing date for PHINIA's (PHIN) senior notes offering?

The closing of PHINIA's (PHIN) senior notes offering is expected to occur on or about September 17, 2024, subject to customary closing conditions.

How does PHINIA (PHIN) plan to use the proceeds from its senior notes offering?

PHINIA (PHIN) intends to use the net proceeds to repay all outstanding borrowings under its term loan A facility, pay offering-related fees and expenses, and for general corporate purposes.

Are PHINIA's (PHIN) new senior notes registered under the Securities Act?

No, PHINIA's (PHIN) senior notes have not been and will not be registered under the Securities Act or any state securities laws. They are being offered and sold under exemptions from registration requirements.