TASC launches $435 million first-lien term loan at Libor plus 575 bps

By Sara Rosenberg

New York, Dec. 3 – TASC Inc. launched on Wednesday its $435 million incremental first-lien term loan (B+) due May 23, 2020 with price talk of Libor plus 575 basis points with a 1% Libor floor and an original issue discount of 97, according to a market source.

With the incremental loan, pricing on the company’s existing first-lien term loan will be increased to Libor plus 575 bps with a 1% Libor floor from Libor plus 550 bps with a 1% Libor floor, the source said.

As for the company’s $150 million incremental second-lien term loan (CCC+) due May 23, 2021, it is talked at a fixed rate of 12%, in line with the existing second-lien term loan and is offered at an original issue discount of 98.

Call protection on the incremental loans is unchanged from the existing loans, with the first-lien debt being non-callable until May 23, 2015 and then having a 101 hard call for one year, and the second-lien debt being non-callable until May 23, 2015 and then having a hard call of 105 for a year and 102.5 for the following year.

The incremental first-lien term loan has a ticking fee of half the spread plus a 1% floor from days 31 to 60 and the full spread plus the floor thereafter, and the incremental second-lien term loan has a ticking fee of half the spread from days 31 to 60 and the full spread thereafter, the source continued.

The company’s $645 million in incremental bank debt also includes a $60 million incremental revolver (B+) due May 23, 2019.

Financial covenants include a consolidated total net leverage ratio.

Commitments are due on Dec. 15, the source added.

Barclays and Jefferies Finance LLC are the bookrunners on the deal, with Barclays the left lead on the first-lien and Jefferies the left lead on the second-lien. SunTrust Robinson Humphrey Inc. and KKR Capital Markets are the co-managers on the deal.

Proceeds will be used to repay existing debt at Engility Holdings Inc. and to fund a cash dividend to Engility shareholders in conjunction with Engility’s acquisition of TASC.

Net first-lien leverage is 2.9 times and net total leverage is 4.4 times.

Under the agreement, TASC is being bought from Kohlberg Kravis Roberts & Co. LP and General Atlantic LLC in an all-stock transaction valued at about $1.1 billion, including the assumption of about $613 million of net debt.

On a pro-forma basis, following the close of the transaction, the combined company is expected to generate around $2.5 billion in revenue and about $210 million in combined adjusted EBITDA in 2014, excluding cost savings.

Closing is expected in the first quarter of 2015, subject to approval of stockholders of both Engility and TASC, consummation of the contemplated financing, regulatory approvals including clearance under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and other customary conditions.

TASC is a Chantilly, Va.-based professional services provider to the national security and public safety markets. Engility is a Chantilly, Va.-based pure-play government services contractor.

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