Rackspace enters into $200 million five-year revolving credit facility

By Tali Rackner

Norfolk, Va., Nov. 30 – Rackspace Hosting, Inc. entered into a credit agreement with agent JPMorgan Chase Bank, NA on Friday that provides for a $200 million unsecured revolving credit facility, according to an 8-K filing with the Securities and Exchange Commission.

The facility may be increased by up to an additional $200 million.

Revolving loans may be borrowed, repaid and reborrowed until Nov. 25, 2020, at which time all amounts borrowed must be repaid.

Borrowings bear interest at Libor plus 125 basis points to 200 bps, based on the company’s consolidated total leverage ratio. The unused fee ranges from 25 bps to 40 bps.

The credit agreement requires the company to maintain a maximum consolidated total leverage ratio and a minimum consolidated fixed charge coverage ratio during the term of the credit facility.

Rackspace has roughly $400,000 of letters of credit outstanding under the facility.

The credit agreement replaces an existing $200 million revolver that was scheduled to mature on Sept. 26, 2016.

Proceeds may be used to repay amounts outstanding under the existing credit agreement, for working capital and general corporate purposes.

Morgan Stanley Bank, NA, Goldman Sachs Bank USA and Wells Fargo Bank, NA are co-syndication agents on the deal. J.P. Morgan Securities LLC, Morgan Stanley Senior Funding Inc., Goldman Sachs Bank USA and Wells Fargo Securities, LLC are joint bookrunners and lead arrangers.

Rackspace is a San Antonio-based managed cloud computing company.

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