Epicor firms original issue discount on $870 million term loan at 99

By Sara Rosenberg

New York, May 11 - Epicor Software Corp. set the original issue discount on its $870 million seven-year covenant-light term loan at 99, the wide end of the 99 to 99½ talk, according to a market source.

As before, the loan is priced at Libor plus 375 basis points with a 1.25% Libor floor.

In addition, the term loan has 101 soft call protection for one year.

The company's $945 million senior secured credit facility (Ba3/B+) also includes a $75 million five-year revolver priced at Libor plus 375 bps with a 75 bps unused fee. There are step-downs to Libor plus 350 bps at 3.5 times total net first-lien leverage and to Libor plus 325 bps at 3.0 times total net first-lien leverage, and the commitment fee can step-down to 50 bps when total first-lien leverage is below 3.0 times.

Bank of America Merrill Lynch and RBC Capital Markets LLC are the joint lead arrangers and bookrunners on the deal.

Amortization on the term loan is 1% per annum with the balance due at maturity.

The credit agreement includes a $150 million accordion feature.

Proceeds from the facility, as well as from $465 million of senior unsecured notes due in 2019 and $647 million of equity, will be used to fund Apax Partners' buyout of Epicor and Activant Solutions Inc.

Under the agreements, Apax is buying Epicor for $12.50 per share in cash and Activant from Hellman & Friedman LLC, Thoma Bravo, LLC and JMI Equity. All of Activant's outstanding shares and stock options will be acquired for cash and, at close, all of Activant's outstanding 9½% senior subordinated notes will be redeemed and its senior secured debt will be repaid.

The purchaser estimates that it will need up to about $715 million to purchase all of the shares and to pay related fees and expenses and an additional $267 million to repay debt of Epicor. It is also estimated that $391 million will be needed to consummate the Activant merger and to pay related fees and expenses, as well as an additional $503 million to repay Activant debt.

In order to complete the Epicor acquisition, Apax commenced a tender offer for Epicor's shares.

Apax intends to combine Activant with Epicor to create a provider of enterprise applications focused on the manufacturing, distribution, services and retail sectors. Following completion of the merger, the combined company will be called Epicor Software Corp.

The acquisition of Activant is conditioned upon the concurrent closing of the acquisition of Epicor.

Closing on the transactions is expected to occur on May 13.

The combined company will have $825 million of annual revenues.

Epicor is an Irvine, Calif.-based provider of enterprise business software services. Activant is a Livermore, Calif.-based technology provider of ERP and point-of-sale software for mid-market retailers and distributors.

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