(Bloomberg) -- The billionaire owners behind Standard Industries Holdings Inc. are no strangers to debt-funded takeovers. But their latest acquisition is taking that playbook to a whole new level.

The industrial group controlled by the families of the late corporate raider Samuel Heyman and co-CEOs David Millstone and David Winter, plans to rely on borrowed money to fund as much as 85% of its purchase of specialty-chemicals company W.R. Grace & Co., including most of its $3.5 billion equity check, according to Bloomberg calculations based on public filings.

While not all the debt will be raised from the same corporate entity, the strategy is a testament to the strength of credit markets, where low rates and a flood of cash among money managers have encouraged companies to borrow billions of dollars for acquisitions, special payouts to their ultra-rich owners and everything in between.

Standard has obtained commitments from banks worth as much as $3.5 billion to fund the Grace deal, which values the company at around $7 billion, regulatory filings show.

The rest will largely come from a $3.2 billion dividend the owners plan to extract from Standard Industries Inc., the operating entity that houses the group’s roofing, waterproofing and building materials divisions, according to Moody’s Investors Service.

“The owners of Standard Industries are following a very aggressive financial policy by using the company’s balance sheet and a large portion of the company’s cash on hand for a sizable dividend,” Peter Doyle, an analyst at Moody’s wrote in a note on Monday. He said the financing will bring no benefit to holders of Standard’s existing debt.

A representative for Standard Industries declined to comment.

Family ATM

To fund the dividend payment, the operating entity intends to use cash on hand as well as a new $2.5 billion seven-year loan that a group of lenders led by Deutsche Bank AG began marketing to institutional investors this week.

The decision to add more debt to Standard’s highly profitable operating business has hurt the company’s credit rating. Moody’s said it expects to push Standard Industries Inc. further into junk upon closing of the acquisition, while S&P Global Ratings has already stripped the company of its investment-grade, citing the dividend distribution.

“The significant increase in debt more than offsets any potential deleveraging and improvement in credit quality from recent earnings improvements,” S&P analyst Nidhi Narsaria wrote in a note.

S&P now rates the company BB+, or one notch into junk. Moody’s said it intends to bring the company’s rating to Ba3, or three notches into junk from Ba2 currently. Both firms rate the new loan investment-grade because of its higher priority of repayment over Standard’s other indebtedness.

Standard is itself the product of a series of acquisitions that started when Heyman took control of GAF Corp. in the 1980s amid a frenzy of corporate takeovers funded with junk bonds arranged by Drexel Burnham Lambert.

Millstone and Winter started running the business after marrying two of Heyman’s daughters, though Winter has since divorced. Together, they have turned it into an industrial conglomerate that operates in more than 80 countries and is the largest roofing company in the world.

Standard plans to run Grace as a standalone entity alongside its other operating businesses, investment arm 40 North and real estate Winter Properties.

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