By Paul Deckelman
New York, March 22 - Kratos Defense & Security Solutions, Inc. priced a quickly marketed and ultimately upsized add-on tranche (expected B3/B+) to its existing secured 2017 bonds on Tuesday, junk market participants reported.
The San Diego-based defense contractor - named after Greek mythology's figure personifying strength and power - came to market with $285 million of 10% senior secured notes due June 1, 2017, upsized from the $250 million transaction announced earlier in the morning.
The bonds priced at 107, in line with price talk, to produce a yield to maturity of 8.515%. They are being issued under the same terms as the $225 million of 10% notes that the company sold last May, which priced at par on May 22 after that deal was upsized from an originally announced $200 million.
The official issuer is Acquistion Co. Lanza Parent, which is to be merged with and into Kratos as part of the pending acquisition by Kratos of Herley Industries, Inc., a Lancaster, Pa.-based designer and producer of microwave technology services for the defense, aerospace and medical industries.
Under the terms of the roughly $270 million deal announced on Feb. 7, Kratos will pay $19 per share for Herley. Proceeds from Tuesday's bond deal will be used, together with cash contributions from Kratos, to finance the acquisition of all of the Herley's outstanding shares, to pay related fees and expenses and for general corporate purposes.
Kratos said that promptly after its acquisition of all of Herley's shares, it will exchange the new notes for a like principal amount of tack-on notes that would constitute an additional issuance of 10% notes under the existing indenture governing the notes sold last May.
The new notes are being sold under Rule 144A and Regulation S, with registration rights, and like the existing notes, carry call protection through June 1, 2014.
The deal came to market via bookrunning manager Jefferies & Co., Inc., along with co-managers KeyBanc Capital Markets Inc. and Oppenheimer & Co., Inc.
| Issuer: | Kratos Defense & Security Solutions, Inc. via Acquisition Co. Lanza Parent
|
| Amount: | $285 million, upsized from $250 million
|
| Gross proceeds: | $304.95 million
|
| Maturity | June 1, 2017
|
| Securities: | Senior secured notes
|
| Bookrunners: | Jefferies & Co., Inc.
|
| Co-managers: | KeyBanc Capital Markets Inc. and Oppenheimer & Co., Inc.
|
| Coupon: | 10%
|
| Price: | 107
|
| Yield: | 8.515%
|
| Call features: | Makewhole call at T+50 bps until June 1, 2014, then at 105, 102.5 and at par on or after June 1, 2016
|
| Equity clawback: | For up to 35% of the issue at 110 until June 1, 2013
|
| Change of Control: | Put at 101% of principal plus accrued interest
|
| Trade date: | March 22
|
| Settlement date: | March 25 (T+3)
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| Existing ratings: | Moody's: B3 (expected)
|
| Standard & Poor's: B+
|
| Distribution: | 144A/Regulation S with registration rights
|
| Price talk: | 107
|
| Marketing: | Quick-to-market
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