A Bank of America Merrill Lynch-led underwriter group has set price talk of L+375, with a 1% LIBOR floor and a 99 offer price on Dell Inc.’s $4 billion, 6.5-year TLB as the LBO deal launched to investors this afternoon, sources said.
The accompanying $1.5 billion, five-year TLC is talked at L+275-300, with a 1% floor, and offered at 99.5. The amortizing TLC has a three-year weighted average life. Both tranches include six months of 101 soft call protection.
The term loans arranged by Bank of America Merrill Lynch, RBC Capital Markets, Barclays, Credit Suisse, and UBS sit behind a $2 billion asset-based revolver, a portion of which is expected to be drawn at closing, sources said.
Standard & Poor’s lowered Dell to BB-, while assigning BB+ first-lien and BB second-lien ratings. The first-lien debt has received a 1 recovery rating, while the second-lien notes received a 2 recovery rating. Moody’s today assigned Ba3 issuer and Ba2 first-lien ratings, along with Ba3 ratings to the planned second-lien notes.
The financing will include an incremental facility set at $2 billion initially, plus additional amounts up to a ratio set at 0.25x inside closing first-lien leverage. The deal includes 50 bps MFN protection, subject to a sunset provision of 18 months.
Arrangers earlier this year sold down a strip of high-yield bridge debt, including a $2 billion first-lien senior secured bridge loan and a $1.25 billion second-lien bridge loan. The first-lien loan has an initial one-year maturity and a seven-year final maturity, while the second-lien will have a one-year initial and eight-year final maturity. Both loans are expected to be refinanced in the high-yield bond market.
Of note, Credit Suisse will be administrative agent on the first-lien bridge, while Barclays is administrative agent on the second-lien bridge. Bank of America Merrill Lynch. RBC Capital Markets and UBS are underwriters.
In addition, the leads have committed to provide customer-financing programs: a $1.9 billion term commercial-receivables-financing facility and a $1.1 billion revolving consumer-receivables-financing facility, according to SEC filings. Microsoft has committed $2 billion of subordinated debt.
With some $5 billion of annual EBITDA, Dell is expected to be leveraged into the low-2x area on a secured basis and into the 3x area total, market sources said.
BAML will have a left lead role on the loan transaction.
Silver Lake has committed to provide $1.4 billion of equity. In addition, certain of the MD Investors have entered into a rollover and equity financing commitment letter, dated as of Feb. 5, 2013, pursuant to which such MD Investors have committed to roll-over approximately 273 million shares of the company’s common stock, and CEO Michael Dell has additionally committed to invest up to $500 million in cash. Lastly, MSDC Management, L.P. has committed to provide $250 million of equity. – Chris Donnelly