Davis + Henderson gets commitment for C$1.56 billion, $244 million

By Angela McDaniels

Tacoma, Wash., July 23 - Davis + Henderson Corp. obtained a commitment letter from Bank of Nova Scotia and Royal Bank of Canada for C$1,561,250,000 and $244 million of secured credit facilities, according to a company news release.

Co-lead arrangers and joint bookrunners Bank of Nova Scotia and RBC Capital Markets plan to syndicate the credit facilities to other financial institutions.

Among other things, the credit facilities will be used to fund the company's acquisition of Harland Financial Solutions from its parent company, Harland Clarke Holdings Corp., for about $1.2 billion in cash. The acquisition is expected to close Aug. 19.

The credit facilities include

• A term loan in the amount of C$427.25 million or the U.S. dollar equivalent to be available to finance the acquisition;

• A C$179 million term loan to be available to refinance Davis + Henderson's existing notes should the company choose to prepay them; and

• A C$355 million revolving credit facility to replace the company's existing revolver. It will have an overdraft facility and fronting fees as per the existing credit facility.

Bridge loans

The credit facilities also include two bridge facilities that will be available to finance the acquisition: a $244 million term loan (the "additional notes bridge facility") and a C$600 million term loan (the "equity bridge facility").

Instead of drawing on the additional notes bridge facility, Davis + Henderson expects to issue about $244 million of senior secured guaranteed notes to some institutional investors, including to some of its current noteholders, immediately prior to the closing. If the notes are issued after the closing, the proceeds will be used to repay the drawdown on the additional notes bridge facility.

The company plans to fund a portion of the acquisition with the proceeds of C$400.18 million of subscription receipts and C$200 million of 6% extendible convertible subordinated debentures. The equity bridge facility is being put in place in case these offerings are not completed by the time the acquisition closes.

The credit facilities are subject to the completion of definitive documentation. They will require compliance with a debt-to-EBITDA ratio and an interest coverage ratio.

"The combination of the strong and growing cash flows of Harland with those of Davis + Henderson will allow us to target reducing our debt-to-EBITDA ratio to below 2.5 times from 3.4 times at closing by 2016 while fully supporting our dividend," Brian Kyle, chief financial officer of Davis + Henderson, said in the news release.

Toronto-based Davis + Henderson provides business services to customers who offer checking accounts, credit card accounts and lending and leasing products.

Harland Financial Solutions provides strategic technology, including lending and compliance, core banking and channel management technology solutions, to banks, credit unions and mortgage companies. The company is based in Lake Mary, Fla.

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