TOKIN, a Japanese subsidiary of KEMET, a leading global supplier of passive electronic components, entered into a new ¥33 billion (approximately $296 million) term loan to be funded by a syndicated bank group led by Sumitomo Mitsui Trust Bank as sole lead arranger.
The company expects the closing and funding of the new term loan, which is subject to customary terms and conditions, to occur on or around November 7, 2018.
In connection with the closing of the term loan, KEMET also amended its revolving credit facility led by Bank of America. The amendment provides KEMET with, among other things, increased flexibility for certain restricted payments and releases certain pledges to allow the company to complete the refinancing. The revolver is currently undrawn.
“We are delighted to find a partner like SMTB to complete this refinancing in Japan. This will provide operating flexibility to achieve our long-term growth objectives which includes growing in Japan as well as the greater Asian Pacific region,” said Per Loof, the company’s CEO.
The new term loan consists of a ¥16.5 billion (approximately $148 million) term loan A tranche and a ¥16.5 billion (approximately $148 million) term loan B tranche. Principal payments under the term loan A are required semi-annually, in the amount of ¥1.375 million (approximately $12.3 million), while the term loan B is due in one payment at maturity. Interest payments are due semi-annually, with the interest rate based on a margin over the six-month Japanese Yen Tokyo Interbank Offered Rate (TIBOR). The applicable margin for term loan A is 2.00% and for term loan B is 2.25%. The current six-month TIBOR rate is approximately 13 basis points. The facility provides KEMET with lower annual cash interest expenses, resulting in interest expense savings of approximately $21 million annually and results in an increase in earnings per share of approximately $0.35 cents per diluted share compared to the current run rate on an annual basis. The new term loans will mature in September 2024.
The proceeds from the new term loan will be used to prepay in full all of the outstanding amounts under the company’s existing term loan credit agreement dated April 28, 2017, with Bank of America as administrative and collateral agent, and to pay related fees, costs and expenses. KEMET currently has approximately $323.4 million outstanding under the existing facility.
Jenner & Block and Mori Hamada & Matsumoto served as KEMET’s legal counsel. Nagashima Ohno & Tsunematsu acted as legal counsel to Sumitomo Mitsui Trust.
