Rackspace plans $2.2 billion in loans, $1.2 billion notes for buyout

By Sara Rosenberg

New York, Sept. 20 – Rackspace revealed in a PREM14A filed with the Securities and Exchange Commission on Tuesday that it plans to get a $2,225,000,000 senior secured credit facility and issue $1.2 billion in senior unsecured notes to help fund its acquisition by Apollo Global Management LLC.

The credit facility consists of a $225 million revolver and a $2 billion term loan.

Backing the notes is a commitment for a $1.2 billion senior unsecured bridge facility.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Barclays, RBC Capital Markets and Credit Suisse Securities (USA) LLC are the leads on the debt.

PSP Investments Credit USA LLC has also committed to provide a portion of the financing.

Other funds for the transaction will come from up to $1,707,000,000 in equity.

Under the agreement, Rackspace is being bought for $32.00 per share in cash. The transaction has a total value of $4.3 billion, which includes the assumption of $43 million of net cash.

In connection with the transaction, funds managed by Searchlight Capital Partners LP will make a strategic equity investment in the acquired company.

Closing is expected in the fourth quarter, subject to the conclusion of the applicable antitrust waiting periods in the United States, the European Union and Israel, stockholder approval and other customary conditions.

Rackspace is a San Antonio-based managed cloud company.

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