New Issue: Rackspace Hosting prices upsized $500 million eight-year notes at par to yield 6½%

By Paul A. Harris

Portland, Ore., Nov. 17 – Rackspace Hosting, Inc. priced an upsized $500 million issue of senior notes due Jan. 15, 2024 (Ba1/BB+) at par to yield 6½% on Tuesday, according to a syndicate source.

The deal size was increased from $350 million.

The yield printed at the wide end of the 6¼% to 6½% yield talk.

Morgan Stanley & Co. LLC, Goldman Sachs & Co. and J.P. Morgan Securities LLC were the joint bookrunners.

The San Antonio-based managed cloud computing company plans to use $140 million of the proceeds to repay all outstanding amounts under its senior revolving credit facility. The remainder of the proceeds will be used for general corporate purposes, which may include share repurchases under its previously announced $1 billion share buyback authorization.

Issuer:	Rackspace Hosting Inc.
Amount:	$500 million, increased from $350 million
Maturity:	Jan. 15, 2024
Securities:	Senior notes
Bookrunners:	Morgan Stanley & Co. LLC, Goldman Sachs & Co., J.P. Morgan Securities LLC
Co-managers:	Wells Fargo Securities LLC, Barclays, Evercore, William Blair
Coupon:	6½%
Price:	Par
Yield:	6½%
Spread:	438 bps
Call:	Make-whole call at Treasuries plus 50 bps until Jan. 15, 2019, then callable at 104.875
Equity clawback:	35% at 106.5 until Jan. 15, 2019
Trade date:	Nov. 17
Settlement date:	Nov. 25
Ratings:	Moody's: Ba1
	Standard & Poor's: BB+
Distribution:	Rule 144A and Regulation S for life
Price talk:	6¼% to 6½%
Marketing:	Roadshow

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