Micro Focus sets issue price on $1.5 billion term loan B-2 at par

By Sara Rosenberg

New York, April 21 – Micro Focus International plc firmed the issue price on its $1,515,000,000 covenant-light term loan B-2 due November 2021 at MA Finance Co. at par, the tight end of revised talk of 99.875 to par and in line with initial talk of par, according to a market source.

Pricing on the term loan B-2 is Libor plus 250 basis points with a 0% Libor floor.

The company’s $5.5 billion in credit facilities (B1/BB-) also include a $2.6 billion seven-year from escrow funding term loan B at Seattle SpinCo, a $385 million seven-year from escrow funding term loan B at MA Finance Co., a €470 million seven-year from escrow funding term loan B at MA Finance Co. and a $500 million revolver.

Pricing on the a $2.6 billion term loan B at Seattle SpinCo and $385 million term loan B at MA Finance is Libor plus 275 bps with a 0% Libor floor and an original issue discount of 99.75, pricing on the euro term loan is Euribor plus 300 bps with a 0% floor and a discount of 99.75, and pricing on the revolver is Libor plus 350 bps with a 0% Libor floor.

All of the $5 billion-equivalent in term loans have 101 soft call protection for six months from the escrow date.

The seven-year term loans include a ticking fee of half the margin from days 31 to 60 and the full margin plus Libor/Euribor as applicable thereafter.

Earlier in syndication, the term loan B-2 was upsized from $1,103,000,000 as plans for a $412 million covenant-light term loan C due November 2019 were eliminated, pricing on the U.S. seven-year term loans was reduced from talk of Libor plus 300 bps to 325 bps and the discounts were tightened from 99.5, and pricing on the euro term loan firmed at the low end of the Euribor plus 300 bps to 325 bps while the discount was modified from 99.5.

Other changes made earlier to the deal included removing the MFN sunset, eliminating the MFN carve-out applicable to the $350 million incremental debt of the freebie, and outlining that a 25 bps step-down on all term loan tranches is subject to senior secured leverage of less than 3 times and can only be applied post-delivery of April 2018 financial statements.

Talk on the eliminated term loan C due November 2019 had been Libor plus 225 bps with a 0% Libor floor and a par issue price.

J.P. Morgan Securities LLC, Barclays, HSBC, Natwest Markets and Bank of America Merrill Lynch are the bookrunners on the deal, with JPMorgan the left lead.

Proceeds will be used to refinance an existing term loan C priced at Libor plus 375 bps with a 0.75% Libor floor, to amend and reprice an existing term loan B-2 from Libor plus 375 bps with a 0.75% Libor floor, to fund the pre-completion cash payment of $2.5 billion for the acquisition of Hewlett Packard Enterprise’s software business segment (HPE Software), to fund the return value of between $400 million and $500 million to Micro Focus’ shareholders, and for general corporate and working capital purposes.

Pro forma senior secured net leverage is currently estimated to be 3.3 times.

Micro Focus is a Newbury, England-based enterprise software company. HPE Software is an infrastructure software provider.

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