Viavi plans $900 million credit facilities with Spirent purchase

By Sara Rosenberg

New York, March 5 – Viavi Solutions Inc. plans on getting an $800 million seven-year covenant-lite term loan to help fund its acquisition of Spirent Communications plc, according to an 8-K filed with the Securities and Exchange Commission on Tuesday.

In addition, the company intends to get a $100 million five-year revolving credit facility that will be unfunded at close and provide additional financial flexibility.

Wells Fargo Securities is the lead arranger and administrative agent on the credit facilities.

Based on the commitment letter, pricing on the term loan is expected at SOFR plus 375 basis points with a 0% floor. The debt will have two 25 bps step-downs at first-lien gross leverage ratios of 1x and 0.75x for the first eight fiscal quarters occurring after the closing date and at first-lien leverage ratios of 1x and 0.75x thereafter.

Included in the term loan is 101 soft call protection for six months.

Pricing on the revolver is expected to be SOFR plus 350 bps with a 0% floor. The revolver has two 25 bps step-downs at first-lien leverage ratios of 1x and 0.75x, and a 50 bps commitment fee, with step-downs to 37.5 bps and 25 bps at first-lien leverage ratios of 1x and 0.75x.

Other funds for the transaction will come from cash on hand and a $400 million investment from Silver Lake in the form of a fully committed 7.5-year senior convertible payment-in-kind toggle note with an initial conversion price of $10.22 per share.

Under the agreement, Spirent shareholders will receive 172.5 pence per share in cash and a special dividend of 2.5 pence per share in lieu of a final dividend for the year ended Dec. 31, 2023. The acquisition price values Spirent at about £1.005 billion, or $1.277 billion based on the British pound sterling to U.S. dollar exchange rate on March 4.

Closing is expected in the second half of this year, subject to shareholder approvals, regulatory approvals and other customary conditions.

The company will prioritize debt paydown utilizing free cash flow generation after the completion of the acquisition to lower leverage ratios toward 4x gross and 3x net over the long term.

Viavi is a Chandler, Ariz.-based provider of communications test, measurement and optical technologies. Spirent is a U.K.-based provider of automated test and assurance solutions for networks, cybersecurity and positioning.

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