Aecom enlarges joint lead arranger list on proposed debt financing

By Sara Rosenberg

New York, Aug. 5 – Aecom Technology Corp. amended its credit facility commitment to add MUFG Union Bank, Scotia Bank, BNP Paribas Securities Corp. and J.P. Morgan Securities LLC as joint lead arrangers and joint bookrunners, joining left lead Bank of America Merrill Lynch, according to an 8-K filed with the Securities and Exchange Commission on Monday.

As previously reported, the company received a commitment for a $3,425,000,000 seven-year covenant-light term loan B, but the amount is expected to be reduced to $1,825,000,000 through the issuance of $1.6 billion of notes.

The company has also received a commitment for a $575 million five-year term loan A-2 and a $500 million five-year performance letter-of-credit facility.

In addition, Aecom plans to amend its existing $1.05 billion revolver due Jan. 29, 2019 and its existing $712.5 million term loan A-1 due June 7, 2018; however, if an amendment is not obtained, the company has a commitment for a new $1.05 billion revolver and a new $712.5 million term loan A to replace the existing debt.

Pricing on the term loan A and revolver is expected at Libor plus 250 basis points, and will be subject to a leverage grid, and the term loan B is expected at Libor plus 300 bps with a 0.75% Libor floor and 101 soft call protection for six months.

The term loan A-2 and performance letter-of-credit facility have interest coverage ratio and leverage ratio covenants.

As for the bond deal, it is anticipated to be split between $800 million of eight-year senior unsecured notes and $800 million of 10-year senior unsecured notes.

Proceeds from the new debt will be used to help fund the cash consideration of the acquisition of URS Corp. and to refinance some existing debt at Aecom and URS.

The term loan A-2 and term loan B may be available on a delayed-draw basis for 105 days in an amount equal to the principal amount of senior notes of URS that remain outstanding at closing of the merger and subject to a right of redemption or repurchase in connection with the merger.

At closing, Aecom expects to have about $5.2 billion in total debt outstanding.

Debt to EBITDA will be a little over 4 times, but the company hopes to use almost all of its free cash flow to reduce debt with the goal being about 2 times debt to EBITDA by the end of 2017.

The acquisition is valued at about $6 billion, including the assumption of URS debt.

Under the agreement, URS stockholders will receive per share consideration equal to $33.00 in cash and 0.734 of a share of Aecom common stock. URS stockholders may elect to receive all cash or all stock consideration, and the election will be subject to a customary proration mechanism to achieve an aggregate consideration mix of about 59% cash and 41% Aecom common shares.

URS stockholders will own shares that account for about 35% of the combined company.

Closing is expected in October, subject to approvals from both companies’ stockholders, regulatory approvals and customary conditions. The transaction is not conditioned on financing.

Aecom is a Los Angeles-based engineering design firm. URS is a San Francisco-based provider of engineering, construction and technical services.

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