Kratos tenders for up to $175 million 7% notes due 2019 via asset sale

By Susanna Moon

Chicago, Aug. 24 – Kratos Defense & Security Solutions, Inc. said it began a cash tender offer for up to $175 million principal amount of its 7% senior secured notes due 2019.

Kratos will purchase the notes at par plus accrued interest with proceeds from an asset sale, according to a company press release.

The tender offer will end at 11:59 p.m. ET on Sept. 21, with settlement set for one business day later.

Kratos closed the sale of the U.S. and U.K. operations of its electronic products division to Ultra Electronics Holdings plc for $260 million in cash plus up to $5 million for taxes incurred as part of the transaction, less a $2 million escrow to satisfy any purchase price adjustments and a working capital adjustment estimated as a net reduction of $7.6 million, according to a separate press release.

The company expects to pay $13 million in transaction-related costs and about $10 million in federal and state income taxes, resulting in net cash proceeds to the company of about $232.4 million.

The tender offer is required under the note terms after an asset sale, the company noted.

The tender plans were announced June 1.

SunTrust Robinson Humphrey, Inc. (404 926-5047) is the dealer manager. D.F. King & Co. (800 870-0653, 212 269-5550 or kratos@dfking.com) is the tender agent and information agent.

Kratos also paid down the $41 million of outstanding debt under its $110 million bank credit facility.

Kratos is a national security solutions provider based in San Diego.

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