Micro Focus reworks tranching, modifies original issue discounts again

By Sara Rosenberg

New York, Oct. 6 – Micro Focus downsized its seven-year covenant-light term loan B to $1,275,000,000 from $1.35 billion and upsized its five-year revolver to $225 million from $150 million, according to market sources.

Also, the original issue discount on the term loan widened to 95½ from revised talk of 97½ and initial talk of 99, and the discount on the company’s $500 million five-year covenant-light term loan C was moved to 95 from revised talk of 97 and initial talk of 99½, sources said.

Pricing on the term loan B is Libor plus 425 basis points with a 1% Libor floor and pricing on the term loan C is Libor plus 375 bps with a 0.75% Libor floor.

Both term loans have 101 soft call protection for one year.

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

Earlier in syndication, the spread on the term loan B was changed from Libor plus 325 bps and the spread on the term loan C was revised from Libor plus 300 bps, the call protection on both term loans was extended from six months, the pricing step-downs in the term loan C were removed, the 18-month MFN sunset provision was eliminated, the incremental allowance was modified, and the excess cash flow sweep was increased to 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, from 50% with step-downs.

Recommitments for the $2 billion senior secured credit facility (B1/BB-) were due at 5 p.m. ET on Monday, sources 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 approval 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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