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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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Marketo’s $1.79B Take-Private Purchase Backed by Debt from Golub

Golub Capital punched upmarket to provide the debt financing behind the $1.79 billion take-private purchase of San Mateo-based digital-marketing company Marketo (NASDAQ:MKTO) by Vista Equity Partners.

The purchase closed today after shareholders approved the agreement on July 28, Marketo announced this morning.

Wilson Sonsini Goodrich & Rosati served as legal advisor to Marketo. Kirkland & Ellis LLP served as legal advisor to Vista. —Kelly Thompson

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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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Beechbrook Capital Raises €100M for Direct Lending Fund

Private debt manager Beechbrook Capital has reached a first close of more than €100 million on its third private debt fund. Private Debt III is targeting €200–250 million in commitments from investors with a hard-cap of €300 million, said managing partner Paul Shea.

The latest vehicle in the series maintains the same investment strategy and will provide private debt, including mezzanine and unitranche, to lower mid-market buyouts in northern Europe.

beechbrookLimited partners in the first close include the European Investment Fund and British Business Bank’s investment arm as well as other European institutional investors. Beechbrook expects to hold a second close at the end of 2016 before the final close, which is now slated for 2017, to allow allocations from next year to come in.

The new fund is an English limited partnership, said Shea, adding that there will be at least two years after the U.K. triggers its departure from the EU before access to the single market becomes an issue. He said that the question of passport access to the EU single market wasn’t flagged as a major issue by investors ahead of the close.

Of more concern to investors, Shea said, was the short-term impact of Brexit on the U.K.’s economic outlook. The lower mid-market, Beechbrook’s specialty, is relatively insulated from the fallout focusing more on micro issues. Potential falls in asset prices could limit appetite for mezzanine debt, but that is balanced out by lower availability of senior debt and potential for improved returns from Beechbrook’s equity kickers, he added.

Beechbrook’s private debt fund focuses on European private equity–sponsored businesses with turnover between €10–100 million. Its loans generally range from €5–15 million per transaction and support acquisitions, shareholder re-alignments, and growth plans.

The firm has a separate UK sponsorless fund which reached a first close of more than £100 million in January.

One of the firm’s most recent deals was from the sponsorless fund, an £8.6 million loan to 4Most to support a reorganisation of shareholders and the business’ growth plan. 4Most provides regulatory and credit-risk analytics consultancy to banks, credit card providers, and other businesses with consumer credit exposure.

In total, Beechbrook has executed 36 transactions across the European lower mid-market and has fully exited 10 of those deals. — Rachel McGovern

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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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Diamond Resorts Rolls out $600M High Yield Bond Offering Backing Apollo LBO

Diamond Resorts is offering $600 million of eight-year (non-call three) unsecured notes, sources say. Bookrunners on the deal are RBC Capital Markets (left), Barclays, and Jefferies.

A roadshow for the offering will run Aug. 1–4, sources noted. The proceeds will be used to back Apollo Management’s $2.2 billion purchase of Diamond Resorts. Apollo in late June agreed to acquire the company for $30.25 per share. At the time the deal was announced, the company said closing was expected over the next few months.

Take note, the issuer is also shopping a $1.2 billion seven-year term loan B and a $100 million revolver to fund the buyout. Price talk for the loan has been set at L+500, with a 1% LIBOR floor and a 99 offer price.

Expected ratings for the notes are CCC+/Caa1. On July 25, S&P Global Ratings lowered its corporate credit rating for Diamond Resorts to B from B+, noting the incremental leverage and the company’s financial sponsor ownership.

Diamond Resorts International operates a network of more than 420 vacation destinations located in 35 countries throughout the continental U.S., Hawaii, Canada, Mexico, the Caribbean, South America, Central America, Europe, Asia, Australasia, and Africa. — Staff reports

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Leslie’s Poolmart Readies $780M Leveraged Loan Backing Recap/Dividend

Sole arranger Nomura is launching with a lender meeting at 11 a.m. EDT tomorrow a $780 million, seven-year covenant-lite B term loan for Leslie’s Poolmart, according to sources.

leslies poolmartProceeds from the loan, along with $420 million of unsecured notes that will be placed privately and cash on hand, will be used to refinance the company’s outstanding debt as well as fund a dividend to shareholders.

The pool supplies company, which is controlled by CVC Capital Partners and Leonard Green & Partners, last tapped the loan market in November 2013 for a repricing of its term loan due October 2019, reducing the coupon to L+325, with a 1% LIBOR floor, from L+400, with a 1.25% floor. At the time of the 2013 repricing, there was $610.5 million outstanding under the TLB. — Kerry Kantin 

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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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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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