On Assignment to launch $822 million incremental term B on Tuesday

By Sara Rosenberg

New York, Feb. 2 – On Assignment Inc. is set to hold lender meeting and call on Tuesday to launch an $822 million seven-year incremental covenant-light term loan B, according to a market source.

Wells Fargo Securities LLC is the lead arranger on the deal.

Price talk on the incremental loan is Libor plus 200 basis points with a 0% Libor floor and an original issue discount of 99.75, the source said.

The incremental loan includes 101 soft call protection for six months and amortization of 1% per annum.

Proceeds will be used to help fund the acquisition of ECS Federal LLC from Roy Kapani, the company’s majority owner and founder, and Lindsay Goldberg for $775 million in cash.

With the incremental loan, the company will launch an amendment to its existing $578 million term loan B due June 5, 2022 that is priced at Libor plus 200 bps with a 0% Libor floor in order to allow for the transaction, the source continued.

Existing lenders will receive a 7.5 bps amendment fee and 101 soft call protection for six months on the existing term loan B.

There is no amortization on the existing term loan B as the 1% per annum was already met.

Mandatory prepayments on the term loan debt will be from an excess cash flow sweep of 50% with reductions to 25% and 0% when senior secured leverage is less than 3 times and less than 2.5 times, respectively. Currently, the step-downs occur at 2.5 times and 2 times senior secured leverage.

Commitments are due on Feb. 20, the source added.

Expected facility ratings are Ba2/BB.

On a pro forma basis, which assumes the acquisition of ECS occurred at the beginning of 2017, On Assignment’s revenues are estimated to be about $3.2 billion and adjusted EBITDA is estimated to be around $379 million.

Closing is expected on April 2, subject to regulatory approvals and customary conditions.

On Assignment intends to change its name to ASGN Inc. effective April 2.

On Assignment is a Calabasas, Calif.-based provider of IT and professional services in the technology, creative/digital, engineering and life sciences sectors. ECS is a Fairfax, Va.-based provider of cyber security, cloud, DevOps, IT modernization and advanced science and engineering solutions to government enterprises.

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