SunGard catching watchful stares as some worry that loan spread may be insufficient

By Sara Rosenberg

New York, May 27 - SunGard Data Systems Inc.'s proposed $5 billion credit facility and $3 billion bond offering are already on peoples' radars even though they're still weeks away from launch, as some market players are unsure whether the loan deal will be able to get done at proposed spreads because of concerns over the bonds.

The credit facility, which is expected to launch into general syndication during the week of June 20, consists of a $1 billion six-year revolver and a $4 billion 71/2-year term loan, with both tranches talked at Libor plus 250 basis points.

There is only a 25 basis point flex up built in to the loan commitment, meaning that the syndicate and the company have negotiated an agreement under which, if for some reason syndication of the massive deal falters, the syndicate can only increase pricing to Libor plus 275 basis points, according to a market source.

The $3 billion senior unsecured and senior subordinated notes will be issued in a Rule 144A offering. Currently, the plan is that the bonds will come out right after the Fourth of July, the source said.

"If you're looking at the bonds not pricing then it'll be tough to get [the credit facility] done at 250 from a relative value standpoint. I think 275 to 300 [bps] is the right range. I think the high-yield market has to get better. This will be one to watch," the source added, explaining that the primary problems facing this upcoming deal are its enormous sized debt offerings and recent market conditions.

JPMorgan and Citigroup are joint lead arrangers on the credit facility, and JPMorgan, Citigroup and Deutsche Bank are joint bookrunners. JPMorgan is also acting as administrative agent, and Deutsche and Citigroup are acting as co-syndication agents.

SunGard has already held a senior managing agents meeting for the credit facility about two week ago.

"I think it's going pretty well," a source previously told Prospect News about the SMA process. "There are five leads. They're not asking for hundreds of millions at the revolver SMA level. I think they're looking for something like $50 million [commitments] for revolver for an SMA role and commitments to the term loan also in the expectation that they get sold out. So they're not really holding any term loan at the end unless they really want it."

Proceeds from the credit facility and bonds will be used to help fund Solar Capital Corp.'s leveraged buyout of SunGard.

In addition, the company is looking to get a $500 million six-year receivables facility, $3.5 billion in equity financing, and the holding company parent of SunGard has the option to issue $500 million in senior unsecured discount notes or use $500 million pay-in-kind loans under a senior bridge facility.

If availability under the receivables facility is less than $500 million, the term loan contained in the credit facility will be increased by the equivalent amount.

And, if the holding company completes the senior unsecured discount notes or PIK deals, the revolver size will decrease to $750 million.

The revolver will include sublimits for letters of credit and swingline loans available in dollars, sterling and euros.

Just in case SunGard is unable to complete the $3 billion note offering, a commitment for a $3 billion one-year senior subordinated bridge facility, with a 10-year final maturity, has been obtained.

Deutsche Bank and Citigroup are the joint lead arrangers for the bridge facility, and Deutsche, Citigroup, JPMorgan, Goldman Sachs and Morgan Stanley are joint bookrunners. Deutsch is administrative agent on the bridge loan.

SunGard's $250 million 3.75% senior notes due 2009 and $250 million 4.875% senior notes due 2014, which were issued under a single indenture in January 2004, will remain outstanding after completion of the leveraged buyout.

The seven private equity investment firms that joined together to form Solar Capital to execute the purchase includes Silver Lake Partners, Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. LP, Providence Equity Partners and Texas Pacific Group.

Under the acquisition agreement, the consortium agreed to purchase SunGard in a transaction valued at about $11.3 billion. SunGard stockholders will receive $36.00 in cash for each share of common stock.

Closing on the LBO is expected to take place in the third quarter, subject to receipt of stockholder approval and customary regulatory approvals as well as satisfaction of other customary closing conditions.

Sungard is a Wayne, Pa., provider of integrated software and processing solutions, primarily for financial services.

Meridian slide persists

Meridian Automotive Systems Inc.'s pre-Chapter 11 bank debt was a bit softer on Friday, with the first-lien paper quoted at 85 bid, 89 offered compared to Thursday's closing levels of 87 bid, 90 offered, according to a trader.

However, the trader went on to explain that it's kind of hard to pinpoint levels since the paper has been all over the place since buzz began that the proposed debtor-in-possession financing facility was struggling in syndication and then was pulled.

Earlier this week, the first-lien paper was quoted at 98 bid, par offered, but the bank debt fell considerably in Wednesday's session on the negative buzz to 92 bid, 95 offered.

The DIP, which launched about two weeks ago, consisted of a $175 million revolving tranche A with an interest rate of Libor plus 250 basis points and a $200 million term loan B with an interest rate of Libor plus 350 basis points.

Maturity was going to be the earliest of 18 months from the date of filing, 45 days after the entry of the interim DIP if the final DIP order has not been made, confirmation of a plan of reorganization or the acceleration of the loans in accordance with the DIP agreement.

And, proceeds were going to be used to repay the company's first-lien debt.

But according to various market sources, the $375 million DIP was pulled because of disappointing numbers.

On Thursday evening, Meridian clarified the issue a little bit by putting out a news release saying that it has received approval from the U.S. Bankruptcy Court for the District of Delaware to extend interim access to $30 million of its DIP through June 30.

The company explained that its request to extend the interim access was the result of ongoing discussions with its lending group regarding revisions to its 2005 operating forecasts. These revisions were driven by recent reductions in production volumes by original equipment manufacturers.

Meridian is a Dearborn, Mich., supplier of front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers.

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