Closing is planned for October 2, 2017
Preparations for the early buyback of the 2013/2021 corporate bond are in progress
Wiesbaden, September 28, 2017. Following the approval of the antitrust authorities in Germany, Russia and Turkey, the US Department of Justice (DoJ) has now made the sale of the SGL Group’s graphite electrode business to the Japanese company Showa Denko (SDK) subject to conditions agreed. The official closing of the transaction is planned for October 2, 2017.
The approval by the US antitrust authorities means that the two former SGL graphite electrode sites in Hickman and Ozark in the US states of Kentucky and Arkansas must be sold by the new owner Showa Denko to a third party, preferably a competitor, for reasons of competition law. This requirement does not affect the company value agreed with Showa Denko or the sales proceeds expected for the SGL Group.
Last October, SGL Group signed an agreement to sell its graphite electrode business to Showa Denko. After deducting liquid funds and debts, both contracting parties had agreed on an enterprise value of 350 million euros. After deducting the usual debt-like obligations, above all provisions for pension costs and restructuring, the SGL Group currently has a cash inflow of at least 230 million euros. The final sales proceeds will be determined on the basis of the balance sheet to be drawn up as of September 30, 2017.
With the proceeds from the sale of the graphite electrode business, the corporate bond of 250 million euros will be repaid early. The corporate bond was issued in 2013 and has an original term until 2021 with a coupon of 4.875 percent. The bond includes an early termination right from January 15, 2017 at 102.438 percent. As of today, the SGL Group is making use of its early termination right and will send a corresponding notification to its bondholders. This termination is planned for October 30, 2017, depending on the closing and the redemption date. Premature termination costs around 9 million euros (early repayment penalty and accelerated depreciation of refinancing costs), which have already been taken into account in the forecast for the consolidated result – continuing operations in 2017. On the other hand, there are savings of around 13 million euros from the 2018 financial year, which are made up of the omitted interest expenses and refinancing costs.
In August of this year, the SGL Group also signed an agreement to sell its business with cathodes, furnace linings and carbon electrodes (CFL / CE) to funds advised by Triton (“Triton”). After deducting liquid funds and debts, both contracting parties have agreed on an enterprise value of 250 million euros. After deducting customary debt-like obligations, above all provisions for pension costs, as well as other customary adjustments, the SGL Group has a cash inflow of more than 230 million euros. The closing is expected in the fourth quarter of 2017. This means that the former Performance Products (PP) division has been completely sold.
With the proceeds from the sale of the CFL / CE business, the convertible bond, originally worth 240 million euros, will be repaid to maturity in January 2018. The convertible bond was issued in 2012 and has a coupon of 2.75%. The repayment of this convertible bond will result in savings of around EUR 12 million from the 2018 financial year, which is made up of the omitted interest expenses, compounding components and refinancing costs.
With the sales proceeds and the repayments of two bonds, the interest expenses will be reduced as described from 2018, the financial debt will be significantly reduced and the company’s balance sheet will be improved.