Dell plans $20.5 billion facility, $25 billion notes for EMC purchase

By Sara Rosenberg

New York, Dec. 14 – Dell Inc. expects to get a $20.5 billion senior secured credit facility and issue up to $25 billion of senior secured and senior unsecured notes to help fund its acquisition of EMC Corp., according to a PREM14A filed with the Securities and Exchange Commission on Monday.

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Barclays, Citigroup Global Markets Inc., Goldman Sachs Bank USA, Deutsche Bank Securities Inc. and RBC Capital Markets are the lead banks on the debt.

The facility consists of a $3 billion five-year revolver, a $3.5 billion three-year non-amortizing term loan A-1, a $3.5 billion five-year term loan A-2, an $8 billion seven-year term loan B and a $2.5 billion 364-day term cash flow facility.

The revolver has an initial unused fee of 37.5 bps.

Included in the term loan B is 101 soft call protection for six months.

Amortization on the term loan A-2 is 5% in years one and two, 10% in years three and four and 70% in year five, and amortization on the term loan B is 1% per annum.

Backing the notes is a commitment for a $16 billion senior secured bridge facility and a $9 billion senior unsecured bridge facility.

The company also has a commitment for a $2.5 billion margin bridge facility and a $1.5 billion VMware note bridge facility.

It is contemplated that, at, prior to or shortly after the closing of the merger, a margin loan facility in an aggregate principal amount of up to $2.5 billion may be entered into by a special purpose vehicle in lieu of the margin bridge facility and a permanent financing solely secured by the VMware intercompany notes in an aggregate principal amount of up to $1.5 billion will be obtained in lieu of the VMware note bridge facility.

Other funds for the transaction will come from up to $4.25 billion in equity and cash on hand.

Under the agreement, EMC is being purchased, while VMware will be maintained as a publicly traded company. EMC shareholders will receive $24.05 per share in cash in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware business. The total transaction value is about $67 billion.

Closing is expected in mid-2016, subject to EMC shareholder approval, regulatory approval and other customary conditions.

Dell is a Round Rock, Texas-based technology and services company owned by Michael S. Dell, founder, chairman and chief executive officer, MSD Partners and Silver Lake. EMC is a Hopkinton, Mass.-based technology company. The combined enterprise systems business will be located in Hopkinton, Mass.

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