Credit
Halvorsen agrees a $680m water metering sale that clears the March covenant test
The disposal arrives a month before management had told lenders to expect news. It removes the leverage question and leaves the 2029 refinancing exactly where it was.
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Halvorsen Industrial Holdings has found the asset sale its bondholders spent the summer doubting. The company agreed on Wednesday to sell its municipal water metering business to a European trade buyer for $680m in cash, subject to competition clearance in three jurisdictions and expected to close in the first quarter of 2027. The unit carried roughly $180m of trailing revenue and $71m of EBITDA, so the price works out at 3.8 times sales and 9.6 times earnings, well above the multiple the market has been applying to the group as a whole.
$680m
Agreed cash consideration for the water metering unit
Against roughly $180m of trailing revenue and $71m of EBITDA. Closing is expected in the first quarter of 2027 subject to competition clearance.
Two trade buyers examined this business in 2025 and neither proceeded, which is why the market had written the option down to nearly nothing. What changed is not the asset but the buyer's own position: a European meter maker under pressure to add North American installed base found a seller with a deadline, and paid a full price for the privilege of not having to build it. Halvorsen's board has been criticised for selling the group's most predictable earnings stream. That criticism is correct and beside the point, because the alternative was to negotiate with lenders in March.
Halvorsen leverage before and after the disposal, proceeds applied to the term loan
| Measure | Before | Pro forma after | Change |
|---|---|---|---|
| Gross debt | $4.05bn | $3.37bn | minus $680m |
| Net debt | $3.84bn | $3.16bn | minus $680m |
| Guided 2026 EBITDA | $760m | $689m | minus $71m disposed |
| Gross leverage | 5.33x | 4.89x | minus 0.44x |
| Covenant EBITDA, credit agreement basis | $820m | $749m | minus $71m disposed |
| Covenant net leverage against a 5.25x test | 4.68x | 4.22x | minus 0.46x |
Bank Season calculation using company guidance and the disclosed terms of the disposal. Covenant EBITDA includes permitted addbacks for restructuring, integration and run rate savings as defined in the credit agreement.
The covenant arithmetic was always going to pass on credit agreement definitions and was uncomfortably close on any conservative reading. At 4.22 times, the March test stops being a negotiation and becomes a formality, and it stays a formality even if second half earnings come in at the bottom of guidance. That is the whole value of this transaction, and it is worth considerably more than the $71m of EBITDA the company gave up to get it.
Halvorsen 5.875% notes due 2029, cash price
Cents on the dollar. Month end mid levels to August, then dealer mid levels on the dates shown.
Why the notes stopped at 68
An eleven point move is a large day in an unsecured bond and it is a long way short of the recovery a solvent issuer would expect. The market is pricing the covenant risk out and the refinancing risk in. Halvorsen still has a term loan maturing in March 2029 and $1.10bn of notes six months behind it, and the disposal shortens the term loan without touching either maturity. The company now has less earnings power against the same wall.
This trade fixes the near term and slightly worsens the medium term, which is exactly what a forced seller's outcome looks like. They have bought eighteen months of quiet at the price of a business that was going to generate cash through the refinancing window. I would take the deal too. I would not pretend it was free.
Delia Marchetti, head of credit research at Harrow Lane Capital
The equity rose 9% and remains down 32% for the year. Third quarter results land on 29 October, and the number that matters has not changed: the covenant EBITDA reconciliation at the back of the release, and whether the addback line is still growing faster than the business underneath it. The disposal buys time for that question to be answered. It does not answer it.
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