KnowBe4 plans $1.13 billion credit facilities for buyout by Vista

By Sara Rosenberg

New York, Oct. 13 – KnowBe4 Inc. has received a commitment for $1.125 billion of six-year senior secured credit facilities to help fund its acquisition by Vista Equity Partners, according to a SC 13D/A filed with the Securities and Exchange Commission on Thursday.

Owl Rock Capital Advisors LLC, Monroe Capital Management Advisors LLC, Fortress Credit Corp., Blackstone Alternative Credit Advisors LP, HPS Investment Partners LLC, Oaktree Capital Management, VCP Capital Markets LLC and Carlyle Global Credit Investment Management LLC are the joint lead arrangers and joint bookrunners on the debt. Owl Rock is the administrative agent.

The credit facilities consist of a $125 million revolver and a $1 billion term loan.

The borrower may elect to effect a covenant conversion at any time following the one-year anniversary of the closing date so long as the total leverage ratio is less than or equal to 7x and no event of default has occurred.

Financial covenants include a LQA recurring revenue leverage ratio, minimum liquidity, and a total leverage ratio that will commence with the last day of the fiscal quarter in which a covenant conversion occurs.

Based on the commitment letter, pricing on the revolver and term loan will be, prior to a covenant conversion, SOFR plus 775 basis points if LQA recurring revenue leverage is greater than 2.25x and SOFR plus 750 bps if LQA recurring revenue leverage is 2.25x or lower. After a covenant conversion, pricing will be SOFR plus 775 bps if total leverage is greater than 7x, SOFR plus 725 bps if total leverage is equal to 7x but greater than 6.5x, and SOFR plus 675 bps if total leverage is 6.5x or lower.

The credit facilities have a 1% SOFR floor.

The term loan has call protection of 103 in year one, 102 in year two and 101 in year three.

Under the agreement, KnowBe4 is being bought for $24.90 per share in cash. The transaction is valued at about $4.6 billion on an equity value basis.

In connection with the transaction, Vista has entered into support agreements with Stu Sjouwerman, founder, chairman and chief executive officer of KnowBe4, and investment funds affiliated with KKR and Elephant Partners. Under these agreements, which collectively account for approximately 83% of KnowBe4’s outstanding voting power, the applicable stockholders have agreed to vote in favor of the transaction and to roll some of their existing equity into the acquiring company or purchase equity in the acquiring company.

Investment funds affiliated with Vista committed to provide up to about $2.18 billion of equity for the transaction and KKR committed to provide up to around $300 million of equity, which amount may be reduced dollar-for-dollar by the amount of any KKR rollover.

Closing is expected in the first half of 2023, subject to customary conditions, including receipt of regulatory approvals and approval by KnowBe4 stockholders.

KnowBe4 is a Clearwater, Fla.-based provider of a security awareness training and simulated phishing platform.

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