By Angela McDaniels
Tacoma, Wash., July 14 - Symphony Technology Group subsidiary Maximus Holdings Inc. plans to issue $48 million of senior subordinated pay-in-kind notes and $48 million of convertible participating preferred equity to help finance its acquisition of MSC.Software Corp., according to a schedule 13D/A filing with the Securities and Exchange Commission.
The notes and preferreds will be issued to Elliott Associates, LP and its subsidiary, Manchester Securities Corp., in exchange for all of their shares of MSC.Software common stock and $49.76 million of cash.
Elliot Associates and its affiliates beneficially own 6,060,058 shares, or 13.3%, of MSC.Software's common stock. The shares will be valued at the acquisition price of $7.63 each.
The PIK notes will have a tenor of five years. Interest will accrue at 15.5% for the first four years and at 20% in the fifth year. They will be callable at any time.
The preferreds will accrue quarterly dividends at the greater of 8% per year and the amount of dividends declared on the common stock into which they are convertible. They will be putable after five years if requested by the holders of a least a majority of the preferreds.
The preferreds will automatically convert into common stock if MSC.Software completes a public offering of at least $30 million in common stock at a per-share price that is no less than the liquidation preference of the preferreds.
Elliott entered into a commitment letter to provide the financing on July 7.
Symphony placement
In addition, Maximus Holdings will issue to Symphony Technology Group $48 million principal amount of senior convertible subordinated notes, $52 million liquidation preference of the preferreds and warrants exercisable for approximately 15% of the fully diluted equity of MSC.Software.
Symphony Technology Group will pay $100 million for the securities.
The convertibles notes will have a tenor of five years and carry no coupon. They will be convertible into the convertible participating preferreds.
The exercise price for the warrants is $0.01 per share.
Both the convertible notes and the PIK notes will be putable at par if MSC.Software holds an initial public offering of debt or equity securities, sells all or substantially all of its assets or incurs a change of control.
At closing, Symphony Technology Group and Elliott will hold approximately 65% and 25% of the fully diluted equity of MSC.Software, respectively. The remaining 10% will be held by a management option pool.
Symphony Technology Group is a strategic private equity firm based in Palo Alto, Calif.
MSC.Software is a Santa Ana, Calif., simulation software company.
First placement
| Issuer: | Maximus Holdings Inc.
|
| Issue: | Senior subordinated pay-in-kind notes, convertible participating preferred equity
|
| Amount: | $96 million
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| Investors: | Elliott Associates, LP and Manchester Securities Corp.
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| Pricing date: | July 7
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| Distribution: | Private placement
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|
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| PIK notes
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| Amount: | $48 million
|
| Maturity: | Five years
|
| Coupon: | 15.5% in years one through four, 20% in year five; payable in kind at maturity
|
| Price: | Par
|
| Call option: | At any time
|
| Put option: | At par upon specified circumstances
|
|
|
| Convertible preferreds
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| Amount: | $48 million
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| Dividends: | Greater of 8% and amount of dividends declared on the common stock into which they are convertible; payable quarterly
|
| Price: | Par
|
| Conversion: | Into MSC.Software Corp. common stock
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| Put option: | After five years if requested by holders of a least a majority
|
|
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| Second placement
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| Issuer: | Maximus Holdings Inc.
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| Issue: | Senior convertible subordinated notes, convertible participating preferred equity and warrants
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| Amount: | $100 million
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| Warrants: | For 15% of MSC.Software's shares
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| Warrant strike price: | $0.01
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| Investor | : | Symphony Technology Group
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| Distribution: | Private placement
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|
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| Convertible notes:
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| Amount: | $48 million
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| Maturity: | Five years
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| Coupon: | 0%
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| Price: | Par
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| Conversion: | Into convertible participating preferreds
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| Put option: | At par upon specified circumstances
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|
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| Convertible preferreds
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| Amount: | $52 million
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| Dividends: | Greater of 8% and amount of dividends declared on the common stock into which they are convertible; payable quarterly
|
| Price: | Par
|
| Conversion: | Into MSC.Software common stock
|
| Put option: | After five years if requested by holders of a least a majority
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