Magnesita Still Renegotiating Debt

Brazilian refractory materials producer is still in discussions to renegotiate terms on a $475m 6-year bilateral loan it raised with JPMorgan last year to help it acquire Germany’s LWB for $938m, including $542m in assumed debt. It is heard targeting an announcement on the renegotiation by the end of August, says a person familiar with the process. The company’s leverage spiked in the past two quarters as revenues slumped in the face of an industry-wide downturn. Magnesita makes materials used in steel furnaces, among other things. In Q1, the company is heard to have received a 90-day waiver on the loan. At the time of funding in November, the loan paid the equivalent of CDI plus 134bp, though that was still when the company was a BB rated issuer. In June, Moody’s cut Magnesita’s rating to B2 from Ba3, citing excessive leverage of 5.9x as of March 31, and the fact much of its foreign currency debt is unhedged. Magnesita’s acquisition of LWB, led by its financial sponsors at GP Investments, won the company accolades from market participants. But the deal ended up burdening the company with debt at a time when it was openly exposed to an industry downturn.