Micro Focus flexes pricing higher on term loan B and term loan C

By Sara Rosenberg

New York, Sept. 30 – Micro Focus increased pricing on its $1.35 billion seven-year covenant-light term loan B to Libor plus 425 basis points from Libor plus 325 bps and on its $500 million five-year covenant-light term loan C to Libor plus 375 bps from Libor plus 300 bps, according to a market source.

Also, the original issue discount on the term loan B was revised to 97½ from 99 and the discount on the term loan C was changed to 97 from 99½, the source said.

Furthermore, the 101 soft call protection on both term loans was extended to one year from six months, the pricing step-downs in the term loan C were removed, the 18-month MFN sunset provision was eliminated and the incremental allowance was modified.

In addition, the excess cash flow sweep is now 75% at more than 3 times net first-lien leverage, 50% at more than 2 times net first-lien leverage and 0% at less than 2 times net first-lien leverage, modified from 50% with step-downs.

The term loan B still has a 1% Libor floor and the term loan C still has a 0.75% Libor floor.

As before, amortization on the term loan B is 1% per annum and on the term loan C is 10% per annum.

The company’s $2 billion senior secured credit facility (B1/BB-) also includes a $150 million five-year revolver.

Recommitments are due at 5 p.m. ET on Wednesday, the source added.

Bank of America Merrill Lynch, HSBC Securities (USA) Inc., RBC Capital Markets LLC, Goldman Sachs Bank USA, Credit Suisse Securities (USA) LLC and Guggenheim are the joint lead arrangers on the deal.

Proceeds will be used to help fund Micro Focus’ merger with the Attachmate Group.

Under the agreement, Micro Focus will acquire the entire issued share capital of the Attachmate Group, in exchange for the issue of about 86.6 million ordinary shares to Attachmate’s parent company, Wizard Parent LLC.

Based on Micro Focus’ closing share price as at Sept. 12 of 842.5p, the value of the shares to be allotted to Wizard is around £729.6 million, which together with net debt of Attachmate as at July 31 of $1,165,800,000 gives an enterprise value to the transaction of $2,349,800,000 before costs.

Closing is expected on Nov. 3, subject to customary conditions, including Micro Focus shareholder approvals and regulatory approvals under the Hart-Scott-Rodino Act.

Combined revenues will be $1.4 billion and underlying adjusted EBITDA will be $500 million.

Micro Focus is a software provider with U.S. headquarters in Rockville, Md., and U.K. headquarters in Newbury, Berkshire. Attachmate, currently owned by Francisco Partners, Golden Gate Capital, Elliott Management and Thoma Bravo, is a Houston-based software holding company.

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