Shawcor Eyes M&A After High-Yielding Bond Sale Loosens Coffers
(Bloomberg) -- Shawcor Inc., an industrial product manufacturer that debuted in the Canadian dollar high-yield bond market earlier this month, is considering acquisitions to accelerate growth.
The Toronto-based company is seeking to increase exposure to trends including the conversion of steel-made infrastructure components into more environmentally friendly composites, or the further expansion of the electric vehicle industry, Michael Reeves, president and chief executive officer of the firm, said in a video interview Monday. The bonds, which were priced Dec. 1, were used to reduce borrowings under bank facilities with stricter covenants.
“This change to our debt structure was really designed to ensure that we have the capacity and the flexibility going forward to invest where we believe the biggest opportunities may lay, whether that is through organic expansion or through potentially M&A,” Reeves said. “We are particularly excited by the long-term opportunities for our composites and our automotive and industrial businesses.”
Shawcor’s senior unsecured notes, first priced at par to pay a 9% coupon, are quoted at around 102.5 cents to the Canadian dollar, according to Bloomberg Valuation bid prices Monday. S&P Global Ratings assigned a rating of B to the notes, five levels below investment grade, and two notches below the company’s senior secured revolving credit facility.
In addition to the bond issue, the company is selling assets, including “divesting” in real estate, said Reeves. This process, which started in early 2020, is likely to continue for another 12 months, he said.
Regarding potential targets for acquisition, “I would not limit that geographically,” said Reeves, whose products range from underground fuel tanks to cables used in nuclear power reactors. “We operate in Asia, in the Middle East, Europe, Latin America and in North America.”
©2021 Bloomberg L.P.