Palm sets Wednesday launch for $430 million credit facility

By Sara Rosenberg

New York, Oct. 1 - Palm Inc. has scheduled a bank meeting for Wednesday to launch its proposed $430 million credit facility (Ba3/B+), according to a market source.

JPMorgan and Morgan Stanley are the joint bookrunners on the deal.

The facility consists of a $30 million five-year revolver and a $400 million 61/2-year term loan, the source said.

Under the original financing plans, the revolver was expected to be sized at $40 million and pricing on the term loan was estimated by the company to be around Libor plus 225 to 275 basis points, depending on ratings and market conditions.

Pro forma for the transaction, net debt to adjusted EBITDA will be around 0.3 times and total debt to adjusted EBITDA will be around 3.4 times.

Proceeds will be used to help fund a recapitalization, under which Elevation Partners will invest $325 million in Palm through the purchase of a new series of convertible preferred stock with a conversion price of $8.50 per share.

As part of the recapitalization, shareholders would receive a $9.00 per share cash distribution that will be funded by the term loan, existing cash and the Elevation investment. The amount of total proceeds to be distributed to shareholders is estimated to be about $940 million.

Upon completion of the transaction, Elevation would own about 25% of Palm's outstanding common stock on an as-converted and diluted basis.

Palm is a Sunnyvale, Calif., mobile computing devices company.

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