First American Payment sets $240 million first-lien loan OID at 99

By Sara Rosenberg

New York, Jan. 3 – First American Payment Systems LP finalized the original issue discount on its $240 million seven-year first-lien term loan B (B1/B+) at 99, the tight end of revised talk of 98.5 to 99 and in-line with initial talk of 99, according to a market source.

Pricing on the first-lien term loan is Libor plus 575 basis points with a 1% Libor floor, and the debt has 101 soft call protection for one year.

The company is also getting an $80 million 7.5-year second-lien term loan (Caa1/CCC+) priced at Libor plus 1,050 bps with a 1% Libor floor and an original issue discount of 97.

The second-lien term loan is non-callable for one year, then at 104 in year two and 102 in year three.

Earlier in syndication, the first-lien term loan was upsized from $230 million, pricing was increased from talk of Libor plus 500 bps to 525 bps, and the call protection was extended from six months; and the second-lien term loan was downsized from $100 million, pricing was lifted to from talk of Libor plus 950 bps to 975 bps, the discount widened from 98, the call protection was changed from 102 in year one and 101 in year two, and the maturity was shortened from eight years.

Other previous changes included setting the total net leverage covenant under the first-lien term loan B at 6.75 times on March 31, 2017 stepping down to 3.5 times by March 31, 2021, from starting at 7.25 times on Dec. 31, 2016 stepping down to 4.5 times by March 31, 2020, and placing a $7.5 million cap, except for cash subject to control agreements, on leverage ratio cash net, from no cap previously.

And, the 18-month MFN sunset was removed, the incremental allowance was revised, the excess cash flow sweep was increased to start at 75% from 50%, and the total net leverage needed for the step-downs was modified, and there were changes to restricted payments, investments/junior payments, the investment/acquisition basket, the asset sale provision and the EBITDA definition.

The total net leverage covenant under the second-lien term loan is 0.5 times wider than first-lien levels.

Goldman Sachs Bank USA and SunTrust Robinson Humphrey Inc. are the lead banks on the deal.

Proceeds will be used to refinance existing debt.

As a result of the recent changes to the term loan sizes, the company is getting $14 million of additional sponsor equity, compared to no additional equity initially.

Closing is expected on Friday, the source added.

First American Payment Systems is a Fort Worth-based payments platform serving small- and medium-sized businesses.

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