Protection 1 launches incremental term loan at Libor plus 475-500 bps

By Sara Rosenberg

New York, April 7 – Protection 1 (Prime Security Services Borrower LLC) launched on Thursday its $1,555,000,000 six-year covenant-light term loan with price talk of Libor plus 475 basis points to 500 bps with a 1% Libor floor and an original issue discount of 98, according to a market source.

The term loan has 101 soft call protection for one year, the source said.

The company’s $1.81 billion incremental senior secured credit facility (Ba2/BB-) also includes a $255 million five-year revolver.

Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets LLC are the bookrunners on the debt.

Commitments are due by 5 p.m. ET on April 20, the source added.

Proceeds will be used to help fund the buyout of ADT Corp. by Apollo Funds for $42 per share in cash and merger with Protection 1, which is currently owned by Apollo. When combined with Protection 1, the aggregate transaction value is about $15 billion.

Other funds for the transaction are expected to come from the issuance of $3.14 billion second-priority senior secured notes due 2023, the issuance of $750 million of preferred securities to an affiliate of Koch Equity Development LLC, equity of $3,575,000,000, rollover equity of $906 million and cash on hand.

Of the total amount of second-priority notes, up to $1.89 billion are anticipated to be sold in a marketed private offering and at least $1.25 billion are expected to be sold to an affiliate of the sponsor and certain other investors in a private placement.

Protection 1 expects that its existing $1,092,000,000 first-lien term loan and $260 million second-lien term loan will remain outstanding.

Concurrently with the closing of the merger, Protection 1 intends to redeem all of ADT’s outstanding 2¼% senior notes due July 2017 and 4 1/8% senior notes due April 2019 and to repay all outstanding borrowings under ADT’s revolver.

ADT’s remaining $3.75 billion of total senior notes are expected to remain outstanding.

The company has received commitments for a $2 billion backstop senior secured term facility and a $1.75 billion backstop senior secured bridge facility.

Pro forma for the transaction, the merged company will generate a combined $318 million in recurring monthly revenue and total annual revenue in excess of $4.2 billion.

Closing is expected by June, subject to the conclusion of the applicable antitrust waiting periods in the United States and Canada, ADT stockholder approval and other customary conditions.

Total leverage is 3.6 times and first-lien leverage is 2.3 times.

Protection 1 is a full-service business and home security company. ADT is a Boca Raton, Fla.-based provider of monitored security, interactive home and business automation and related monitoring services.

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