OpenText leveraged the loan market in a $3 billion deal backing Micro Focus.pitch book

OpenText has negotiated a price for a $3.085 billion leveraged loan that will be used to finance the company’s acquisition of Micro Focus International following a conference call with lenders yesterday afternoon, sources said. gone. Commitments to trade expire by noon ET on November 16th.

The 7-year term loan is offered at Sofr+CSA+350 with a floor of 0.5% and an OID ranging from 96-97. CSA is a flat 10 bps and provides lenders with 101 soft call protection for 6 months. This facility is also governed by a total net leverage ratio covenant of up to 4.5x.

According to the story, the yield to maturity is between 8.64% and 8.86%.

Barclays leads an arranger group that includes BMO Capital Markets, RBC Capital Markets, Citi, MUFG, HSBC, PNC Capital Markets, National Bank of Canada and CIBC. Barclays will act as managing agent.

S&P Global Ratings and Fitch have assigned a facility rating of BBB- to the new term loan. S&P and Fitch issuer ratings are BB+ and both have a negative outlook, while Moody’s is expected to assign a corporate rating of Ba2 with a stable outlook.

Proceeds from the new term loan, along with $1.5 billion of other senior secured debt, will be used to finance the acquisition. AugustThe all-cash transaction represents an enterprise value of approximately $6 billion. The transaction is expected to close in the first calendar quarter of 2023.

Micro Focus’ existing debt will be repaid as part of the transaction. The issuer has approximately $4.1 billion in debt as of April 30, including €560.6 million of his TLB-1 (E+450, 0% floor) that matures in June 2025. I was holding $607.6 million in TLB-4 for the period ending June 2025 (L+425, 1% floor). TLB at June 2024 maturity of $1.38 billion (L+275, 0% floor). TLB of €750m in 01/27 (E+400, 0% floor); TLB in 01/27 of $748.1m (Sofr+CSA+400, 0.5% floor). Meanwhile, OpenText currently has an outstanding $957.5 million Term Loan B (L+175, 0% floor) due May 2025, as well as several bond issuances.

The purchase price represents Micro Focus’ pro forma adjusted EBITDA of 6.3x and pro forma revenue of 2.2x for the prior 12 months ended April 30. Management expects the combined company’s net leverage to be 3.8x at closing, with a target of reducing it to less than 3x within eight quarters of closing. The combined company is expected to have annual revenues and adjusted EBITDA of $6.2 billion and $2.2 billion, respectively. $400 million in cost synergies are expected, including his $300 million from previously announced cost-saving programs at Micro Focus.

Based in Canada, OpenText (Nasdaq: OTEX) offers a suite of information management software products and services.

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