Pegasus Steel taps Citizens to arrange debt for Merrill acquisition

Peter Benson
+David Brooke
+ 1 more

16 January 2024•2 min read

Private equity firm Arlington Capital Partners has turned to Citizens Bank to arrange a debt financing for its portfolio company Pegasus Steel, according to 9fin sources.

Proceeds would fund the acquisition of steel fabrication company Merrill Technologies Group and another unnamed firm, according to the sources. Those companies would be combined with Pegasus, which Arlington acquired last year in an all-equity transaction.

Pegasus specializes in large and complex steel constructions, including components for aircraft carriers, submarines and other military combat vehicles. It was also involved in the refurbishment of the iconic Statue of Liberty in New York City, according to its website.

The company’s bankers are pitching the debt to investors on roughly $50m in combined EBITDA, after accounting for the acquisitions.

Merrill, a steel fabrication business headquartered in Michigan, contributes around $40m of that EBITDA, compared to a smaller contribution of around $10m from Pegasus. The third entity, which is much smaller, contributes a nominal amount of EBITDA, the sources said.

The size of the term loan is expected to be around $225m, implying leverage of 4.5x. Pricing is being discussed in the region of SOFR+550bps with a 98 OID, according to sources.

Citizens Bank underwrote the debt financing for the acquisitions, and is now in the process of syndicating the term loan portion to other investors, the sources said.

We reached a media representative for Arlington and an employee at Pegasus, but neither firm provided comment for this article. Citizens and Merrill both declined to comment.