Protection 1 flexes incremental term loan to Libor plus 450 bps

By Sara Rosenberg

New York, April 18 – Protection 1 (Prime Security Services Borrower LLC) reduced pricing on its $1,555,000,000 six-year covenant-light term loan to Libor plus 450 basis points from talk of Libor plus 475 bps to 500 bps, according to a market source.

Also, the original issue discount on the term loan was revised to 99 from 98 and the MFN sunset was removed, the source said.

Furthermore, the definition of consolidated EBITDA was changed to permit add backs realizable within 18 months and not to exceed 20% of consolidated EBITDA from unlimited, the source continued.

As before, the term loan has a 1% Libor floor and 101 soft call protection for one year.

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.

Recommitments are due by 5 p.m. ET on Tuesday, 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.

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

Concurrent 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.

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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