Leidos/Abacus updates pricing terms on $1.13 billion term loan B

By Sara Rosenberg

New York, June 7 – Leidos Holdings Inc./Abacus Innovations Corp. firmed pricing on its $1,131,450,000 seven-year covenant-light term loan B at Abacus at Libor plus 275 basis points, the low end of the Libor plus 275 bps to 300 bps talk, according to a market source.

Also, the 0.75% Libor floor was removed from the term loan B so it now has no Libor floor and the original issue discount was tightened to 99.75 from 99.5, the source said.

The term loan B still has 101 soft call protection for six months, a ticking fee of half the spread from days 31 to 60 and the full spread thereafter, and amortization of 1% per annum.

Mandatory prepayments are from 50% of excess cash flow, subject to step-downs to 25% at senior secured leverage ratio of 2.75 times and 0% at senior secured leverage ratio of 2 times, 100% of asset sale proceeds, subject to reinvestment rights, and 100% of debt issuance proceeds, subject to customary exceptions.

Recommitments were scheduled to be due at 5 p.m. ET on Tuesday, the source added.

The company’s $3,281,450,000 senior secured credit facility (Ba1/BBB-) also includes a $750 million five-year revolver at Leidos, a $690 million five-year term loan A at Leidos, a $400 million three-year term loan A at Abacus and a $310 million five-year term loan A at Abacus, all priced at Libor plus 225 bps.

Citigroup Global Markets Inc., MUFG, Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Goldman Sachs & Co., Scotiabank and Wells Fargo Securities LLC are the lead banks on the deal.

The credit facility is being done in connection with the merger of Leidos with Lockheed Martin Corp.’s Bethesda, Md.-based realigned information systems & global solutions business (Abacus).

Proceeds from the Leidos credit facility will be used with cash on hand to pay a special dividend to Leidos stockholders in an amount not to exceed $1.03 billion and to repay existing debt.

The Abacus credit facility will be used to make a special cash payment of $1.8 billion to Lockheed Martin.

The merger will result in Lockheed Martin shareholders receiving about 50.5% of the combined company on a fully diluted basis, with pre-transaction Leidos shareholders owning the balance.

Closing is expected in August, subject to approval by the shareholders of Leidos, as well as regulatory approvals and customary conditions.

Leidos is a Reston, Va.-based provider of technology and sector expertise to customers in national security, health and engineering.

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