Leidos/Abacus launches $1.13 billion term B at Libor plus 275-300 bps

By Sara Rosenberg

New York, May 25 – Leidos Holdings Inc./Abacus Innovations Corp. launched on Wednesday its $1,131,450,000 seven-year covenant-light term loan B at Abacus with price talk of Libor plus 275 basis points to 300 bps with a 0.75% Libor floor and an original issue discount of 99.5, according to a market source.

The term loan B has 101 soft call protection for six months, a ticking fee of half the spread from days 31 to 60 and the full spread thereafter, and amortization of 1% per annum, the source said.

Mandatory prepayments are from 50% of excess cash flow, subject to step-downs to 25% at senior secured leverage ratio of 2.75 times and 0% at senior secured leverage ratio of 2 times, 100% of asset sale proceeds, subject to reinvestment rights, and 100% of debt issuance proceeds, subject to customary exceptions.

Commitments are due on June 6, the source added.

As previously reported, the company already launched with a bank meeting during the week of May 16 $2.15 billion of revolver and term loan A debt talked at Libor plus 225 bps.

The pro rata debt is split between a $750 million five-year revolver at Leidos, a $690 million five-year term loan A at Leidos, a $400 million three-year term loan A at Abacus and a $310 million five-year term loan A at Abacus.

Citigroup Global Markets Inc., MUFG, Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Goldman Sachs & Co., Scotiabank and Wells Fargo Securities LLC are the lead banks on the $3,281,450,000 senior secured credit facility (Ba1/BBB-).

The credit facility is being done in connection with the merger of Leidos with Lockheed Martin Corp.’s Bethesda, Md.-based realigned information systems & global solutions business (Abacus).

Proceeds from the Leidos credit facility will be used with cash on hand to pay a special dividend to Leidos stockholders in an amount not to exceed $1.03 billion and to repay existing debt.

The Abacus credit facility will be used to make a special cash payment of $1.8 billion to Lockheed Martin.

The merger will result in Lockheed Martin shareholders receiving about 50.5% of the combined company on a fully diluted basis, with pre-transaction Leidos shareholders owning the balance.

Closing is expected in August, subject to approval by the shareholders of Leidos, as well as regulatory approvals and customary conditions.

Leidos is a Reston, Va.-based provider of technology and sector expertise to customers in national security, health and engineering.

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