Merrill finalizes $400 million term loan at Libor plus 500 bps

By Sara Rosenberg

New York, Sept. 26 – Merrill Corp. firmed pricing on its $400 million seven-year first-lien term loan (B2/B) at Libor plus 500 basis points, the low end of the Libor plus 500 bps to 525 bps talk, according to a market source.

Furthermore, the Libor floor on the term loan was changed to 1% from 0%, and the excess cash flow sweep was revised to 75% with step-downs to 50%, 25% and 0% at first-lien net leverage of 3.25x, 2.75x and 2.25x from at first-lien net leverage of 3.5x, 3x and 2.5x, the source said.

Also, unlimited restricted payments are subject to 2.2x total net leverage instead of 2.4x, unlimited restricted debt payments are subject to 2.45x total net leverage, revised from 2.65x, unlimited investments are subject to 2.7x total net leverage, changed from 2.9x, the incremental ratio test is subject to closing date first-lien net leverage of 3.7x, modified from 4.25x, and the use of a builder for restricted payments and restricted debt payments is subject to total net leverage of 3.2x, instead of 3.9x.

In addition, the EBITDA definition was changed to 20% combined for pro forma cost savings/synergies, business optimization/restructuring charges and data site migration costs from previously uncapped, the look-forward period was reduced to 18 months from 24 months and the addback for costs in connection with “strategic initiatives” was removed.

Lastly, the company is now required to hold quarterly management discussion and analysis and lender calls, the source continued.

The term loan still has an original issue discount of 99 and 101 soft call protection for six months.

Goldman Sachs Bank USA and Credit Suisse Securities (USA) LLC are the leads on the deal.

Recommitments were scheduled to be due at 12:30 p.m. ET on Thursday, the source added.

Proceeds will be used to refinance an existing term loan B and fund a dividend to shareholders.

Merrill is a St. Paul, Minn., SaaS-based provider of secure collaboration solutions for professionals.

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