Palm plans $440 million credit facility for recapitalization

By Sara Rosenberg

New York, June 4 - Palm Inc. plans on getting a new $440 million credit facility in connection with a recapitalization plan, company officials said in a conference call Monday.

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

The facility consists of a $40 million revolver and a $400 million 61/2-year covenant-light term loan, officials said in the call.

Pricing on the term loan is estimated around Libor plus 225 to 275 basis points, depending on ratings and market conditions, officials added.

The net debt to EBITDA ratio will be 0.9 times.

Under the planned recapitalization, 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.

Shareholders will 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 will own about 25% of Palm's outstanding common stock on an as-converted and diluted basis.

The recapitalization is expected to close in the third quarter, subject to shareholder approval, customary regulatory approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act, and other customary closing conditions.

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

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