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Apollo Lines Up $3.425B Leveraged Loan Package Backing Rackspace LBO

rackspaceRackspace Hosting provided the breakdown of the $3.425 billion financing package that will back the buyout of the software company by Apollo Global Management. The financing commitment includes a term facility of up to $2 billion, a $225 million revolver, and an unsecured bridge loan of up to $1.2 billion, a regulatory filing shows.

Citigroup, Deutsche Bank, Barclays, Credit Suisse, and Royal Bank of Canada are leading the financing behind the $4.3 billion buyout. PSP Investments Credit USA also is providing a portion of the financing. The sponsor’s equity contribution will be up to $1.707 billion, according to the filing.

The purchase is expected to close in the fourth quarter, pending customary closing conditions.

Apollo last month announced that it was taking the NYSE-listed company private for $32 per share in cash. After closing, Searchlight Capital Partners will purchase an equity stake in the acquired company.

Rackspace’s existing debt includes a $500 million issue of 6.5% notes due 2024 that was placed in November of last year. Those notes traded at 109 this morning, compared to a 103 context before the news broke last month, trade data shows.

San Antonio, Texas–based Rackspace is buying the cloud computing company that generated revenue in 2015 of $2 billion. —Staff reports

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KKR Capital Launches $300M Leveraged Loan Backing Epicor Buy

KKR Capital Markets has scheduled a lender call for today at noon EDT to launch a $300 million of incremental facilities for Epicor. The financing includes a $225 million non-fungible first-lien term loan alongside a $75 million second-lien term loan that has been preplaced, according to sources.

epicor logoAs reported, KKR is leaving Epicor’s existing loans in place as it acquires the software concern from Apax Partners. A $2.11 billion financing arranged last year by Jefferies, Macquarie, and Nomura included pre-cap language that would allow the loans to remain in place following the sale to a qualified sponsor.

The 2015 dividend recapitalization included a $1.4 billion covenant-lite first-lien term loan due 2022 (L+375, 1% LIBOR floor), a $100 million revolver due 2020, and $610 million of privately placed second-lien loans. That transaction leveraged Epicor at 5.1x first-lien and roughly 7.3x total.

Epicor is a global provider of business software for the manufacturing, distribution, retail, and services industries. — Staff reports

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Epiq Systems Eyes $1.3B of Debt for Buyout by OMERS, Harvest Partners

Bank of America Merrill Lynch, Goldman Sachs, Antares Capital, and Golub Capital have agreed to provide roughly $1.3 billion of debt financing to back the acquisition of Epiq Systems by OMERS Private Equity, the private equity arm of OMERS pension plan, and funds managed by Harvest Partners, a middle market private equity fund, according to an Epiq Systems statement.

Epiq SystemsEpiq Systems this morning announced that it had entered into an agreement to be acquired for $16.50 per share in cash, representing a total value of roughly $1 billion, including assumed debt. The acquisition is expected to close in the fourth quarter of 2016.

Upon completion of the acquisition, Epiq will become a privately held company and will be combined with DTI, a legal process outsourcing company majority-owned by OMERS and managed by OMERS Private Equity.

In April 2015, Epiq Systems obtained a $75 million fungible add-on to its B term loan due August 2020 (L+375, 0.75% LIBOR floor). As of March 31, there was roughly $366 million outstanding under the B term loan, $19 million outstanding under its $100 million revolver due 2018, and roughly $12 million outstanding under its capital leases.

Kansas City, Kan.–based Epiq is a global provider of integrated-technology solutions for the legal profession. Corporate issuer ratings are B+/B1. The company’s shares currently trade on the Nasdaq under the ticker EPIQ. — Richard Kellerhals

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Polyconcept Readies $435M Leveraged Loan Backing LBO by Charlesbank

Goldman Sachs, RBC Capital Markets, and Natixis are launching a with a lender meeting on Thursday, July 28, at 10 a.m. EDT their $435 million term loan B backing Charlesbank Capital Partners’ purchase of Polyconcept, a value-added supplier of promotional products, according to sources.
polyconcept logoThe financing package includes an $88 million ABL revolver and a $435 million seven-year first-lien term loan, sources said. A second-lien term loan will be privately placed.

Polyconcept last tapped the loan market in 2013 with a first- and second-lien loan package to refinance existing debt. The financing package included a cross-border first-lien term loan split between a $255 million U.S. dollar tranche and a €46 million euro piece, as well as a $125 million privately placed second-lien term loan.

Polyconcept, headquartered in New Kensington, Pa., develops and distributes promotional, lifestyle, and gift products. The company is currently owned by Investcorp. — Chris Donnelly

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Apollo Lines up Banks for $1.6B Outerwall LBO Financing

Bank of America Merrill Lynch, Jefferies Finance, Barclays, and Credit Suisse are providing Apollo Global Management with debt financing to back the $1.6 billion buyout of Outerwall Inc.

outerwall logoBellevue, Wash.-based Outerwall announced the $52-per-share cash buyout this morning. The purchase price is a 51% premium over the closing stock pricing on March 14, before Outerwall’s board announced plans to explore a possible sale.

The board has unanimously approved the Apollo offer. The purchase is expected to close in the third quarter, pending shareholder approval.

Outerwall said it will release second quarter earnings Thursday, but it does not plan to hold a conference call to discuss results.

In April, the owner of Redbox and Coinstar kiosks reported first-quarter earnings that beat expectations.

Earlier this year agencies lowered the company’s credit ratings on deteriorating performance in the physical rental business. S&P Global Ratings lowered Outerwall’s corporate credit rating in February by two notches to BB–, from BB+. Similarly, Moody’s downgraded Outerwall to Ba2, from Ba3.

Separately, the company this morning declared a quarterly dividend of $0.60 per share of common stock to be paid on Sept. 6. — Kelly Thompson

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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In Shadow of Brexit, Burgeoning European LBO Loan Market Proceeds with Caution

european lbo loan volume

U.K. buyouts accounted for only €2.33 billion of LBO volume across the leveraged loan market in 2016’s first half, versus €14.4 billion of supply for non-U.K. buyouts, according to LCD, an offering of S&P Global Market Intelligence.

Note the €14.4 billion is the largest first-half volume for non-U.K. LBOs since the turn of the decade, indicating that sponsors were either keen to raise financing ahead of the June 23 U.K. Brexit vote, or were simply not perturbed by it.

Sponsors expect LBO activity to continue into the second half of 2016, although the U.K.’s decision to leave the European Union has left market participants in a brave new world of financing, and the biggest obstacle to a pick-up in LBOs will be new valuations. – Nina Flitman

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M&A, LBO Leveraged Loan Issuance Remains in Check During 2nd Quarter

M&A loan volume US

M&A leveraged loan volume declined slightly in 2016’s second quarter, to $56.4 billion from $65.3 billion in the previous three months, according to LCD.

In general, M&A activity has been lackluster, as high equity prices, stiff competition for deals, and regulatory constraints keep a lid on activity.

As for LBOs, private equity shops maintained the unspectacular pace established in the first quarter of the year, logging $18.1 billion in leveraged loan buyout loan volume during the second quarter. – Staff reports

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This story is part of analysis, written by Kerry Kantin, which first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Dell Software Group Nets Financing for EMC Buyout

Credit Suisse and RBC Capital Markets are providing an undisclosed amount of debt financing to back Francisco Partners and Elliott Management’s purchase of Dell Software Group, sources said.

dellPublished reports put the software unit’s purchase price at north of $2 billion. Dell Software provides advanced analytics, database management, data protection, endpoint systems management, identity and access management, Microsoft platform management, network security, and performance monitoring.

Details of the new financing haven’t emerged, but the software group’s two principal businesses, Quest Software and SonicWALL, are both well known to the leveraged finance markets.

A planned $2 billion buyout of Quest by Insight Venture Partners in 2012 was backed by an $820 million senior secured term loan, a $75 million senior secured revolving credit, and a $300 million senior unsecured bridge, all provided by J.P. Morgan, RBC Capital Markets, and Barclays. The company was later sold to Dell instead, and its purchase of SonicWALL occurred around the same time.

Credit Suisse arranged a $155 million first-lien term loan and a $105 million second-lien term loan to support the $717 million buyout of SonicWALL by an investor group led by Thoma Bravo that includes Teachers’ Private Capital back in 2010.

Dell, meanwhile, is expected to use proceeds from the asset sale to repay debt stemming from its recent acquisition of EMC Group, specifically a portion of its $3.2 billion, three-year term loan A-1, which is held by the deal’s underwriters and other commercial banks. —Chris Donnelly

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Protection One Readies $1.45B of LBO Loans

A Credit Suisse-led arranger group has accelerated the deadline to Thursday, June 18 at noon EDT, from June 23, for the $1.45 billion first- and second-lien financing backing Apollo Management’s purchase of Protection One and ASG Security, according to sources.

The financing is structured as a $1.055 billion, six-year first-lien term loan; a $300 million, seven-year second-lien term loan; and a $95 million revolver. The term loans will be covenant-lite.

Price talk is at L+400, with a 1% LIBOR floor, and a 99 offer price on the first-lien term loan, and L+875, with a 1% floor, and a 98 OID on the second-lien. First-lien lenders are offered six months of 101 soft call protection, while the second-lien would include 102, 101 hard call premiums in years one and two, respectively.

At talk, the first-lien offers a yield to maturity of about 5.3%, while the second-lien would yield about 10.55%.

Credit Suisse, Barclays, Deutsche Bank, Jefferies, RBC Capital Markets, and Goldman Sachs are arranging the transaction.

Apollo last month agreed to purchase both Protection One and ASG Security and merge the two businesses. The purchase prices of the transactions were not disclosed, but the combined company is expected to generate annual revenue in excess of $500 million, according to Protection One. Closing is expected in mid-2015.

Protection One, a business and home security company, is currently owned by GTCR.

Protection One’s existing loans will be refinanced in connection with the transaction. The issuer has in place a $687 million term loan and a $55 million revolver, according to a recent S&P report. The existing term loan due March 2019 (L+325, 1% floor) is governed by a leverage test. – Richard Kellerhals/Kerry Kantin

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Veritas Underwriters Ready Loan Backing LBO by Carlyle

An underwriter group led by Bank of America Merrill Lynch has scheduled a lender meeting for 11 a.m. EDT on Monday, June 6, to launch the cross-border financing backing the Carlyle Group’s acquisition of Veritas, sources said.

Recall the covenant-lite loan due January 2023 funded in January as the LBO closed. Though official price talk has yet to circulate the market, underwriters BAML, Morgan Stanley, UBS, Jefferies, Barclays, and Citigroup have been privately showing the cross-border term debt in the 90 area in recent weeks, and with M&A-related new-issue activity slowing, early commitments are said to have surpassed underwriters’ initial $500 million target.

Marketing of the loan follows on the heels of the recent sale of the underwriters’ unsecured debt exposure. Underwriters have now placed all $825 million of the notes, with several underwriters breaking ranks for an initial sale in an 83–84 context. Underwriters later moved the remainder of that paper at 86.5, for a yield of roughly 13.35%, according to sources. Goldman Sachs and Credit Suisse, part of the original underwriter group, were involved the initial sale, sources added.

As noted back in January, Symantec Corp. and the Carlyle Group amended the agreed purchase price for Carlyle’s acquisition of Symantec’s Veritas information management business, to $7.4 billion from $8 billion. At the time, Symantec and Carlyle also agreed to increase the amount of offshore cash remaining in Veritas from $200 million to $400 million, which will result in a net consideration to Symantec of $7 billion. This consideration will consist of $6.6 billion in cash and a $400 million equity interest in Veritas.

A revised loan package eventually funded at the caps; both a $2.109 billion term loan B-1 and €497 million euro TLB, which is priced at L/E+562.5, with a 1% LIBOR/Euribor floor. An additional $400 million, second-out TLB-2 is priced at L+762.5, with a 1% LIBOR floor.

The issuer is rated B/B2, while the senior secured debt drew B+/B1 ratings, with a 2L recovery rating from S&P Global Ratings. Agencies assigned CCC+/Caa1 ratings to the unsecured debt, which drew a 6 recovery rating from S&P Global Ratings.

Underwriters haven’t yet made any move to market the additional $750 million of secured notes that were part of the final deal. While structure is fluid, that financing was expected to be a $441 million U.S. dollar tranche and €262 million of euros, sources said.

As reported, the institutional loan component of the transaction launched to market late last year as a $2.45 billion dollar term loan and a €760 million euro tranche, though was shelved due to market conditions. At the time, a cross-border, dual-currency bond financing was also set to include $500 million of seven-year (non-call three) secured notes and $1.775 billion of eight-year (non-call three) unsecured notes. BAML is left lead on the loans, and Morgan Stanley is left lead on the bonds.

Veritas provides information-management software and services, including multiple cloud deployments, managed services, on-premises infrastructure, and core backup and recovery services. — Chris Donnelly

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.