ADT amends loan to allow for issuance of $2.65 billion of notes

By Sarah Lizee

Olympia, Wash., March 18 – ADT Inc. (Prime Security Services Borrower LLC) closed an amendment on Friday to its credit agreement with Barclays as administrative agent, according to an 8-K filing with the Securities and Exchange Commission filed Friday.

The amendment increases the net first-lien leverage ratio for the incurrence of pari passu debt to 3.2 to 1 from 2.35 to 1, provides for $300 million of additional incremental capacity and lifts the borrowing capacity under the revolver by $50 million.

The increased revolver replaces the revolving credit commitments under the company’s revolving credit agreement dated Feb. 15, 2019 with Mizuho as administrative agent.

The amendment also made “several other changes to provide the borrower with additional flexibility to de-lever its balance sheet and opportunistically refinance existing indebtedness.”

The effectiveness of the amendment is subject to the prepayment of $500 million principal amount of term loans outstanding under the existing credit agreement and may be delayed or may not occur as described or at all, the filing noted.

Upon the effectiveness of the amendment, ADT will terminate its revolving credit agreement with Mizuho.

Other terms of the amendment were not disclosed in Monday’s filing.

As previously reported, the company proposed to enter into the amendment to facilitate a refinancing through the issuance of up to $2.65 billion of new notes.

Last week, the company said it is considering $750 million each of first-priority senior secured notes due 2024 and first-priority senior secured notes due 2026. Additionally, ADT said it may concurrently issue up to $1.15 billion senior unsecured notes due 2027. Each series of notes may be issued in one or more tranches.

ADT said it expects to launch the offerings this week, subject to market and other conditions.

Proceeds of the Rule 144A and Regulation S offering will be used to redeem or repurchase $1 billion of 9¼% second-priority senior notes due 2023 and to repay $500 million of term loans outstanding under the company’s credit agreement.

According to an 8-K filed March 12, ADT was also asking to revise the first-lien net leverage ratio covenant to 4.6 times from 3.3 times.

As of March 12, the company’s first-lien net leverage is 2.8 times.

The company had said the amendment would also increase the dollar prong under the incremental loan to $1.65 billion, less any amounts already used under the dollar prong prior to the closing of the amendment, from $1.35 billion, under which there was no remaining capacity as of March 12.

Furthermore, the amendment would add a voluntary refresh prong to the incremental loan so that incremental capacity builds for voluntary prepayments of the term loan after the closing date of the amendment, except to the extent funded with the proceeds of long-term debt.

Regarding restricted payment capacity, the cumulative credit grower prong would be unchanged, except that the reset cumulative retained excess flow would be reset to zero and usage would be subject to 3.65 times total net leverage instead of 3.6 times.

Additionally, the post-initial public offering basket under restricted payments would be amended to $150 million per annum from 6% of IPO proceeds per annum, which is currently $85 million.

And, the scope of redemptions and prepayments of debt would be modified to be applicable to subordinated debt only from applicable to junior-lien, subordinated and unsecured debt.

Revolver and term loan B lenders were offered a 50 basis points amendment fee.

ADT is a Boca Raton, Fla.-based security services company.

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