ADT to market $1.89 billion of overall $3.14 billion secured notes backing buyout and merger

By Paul A. Harris and Sara Rosenberg

Portland, Ore., April 1 – ADT Corp. announced in a Friday filing with the Securities and Exchange Commission that it plans to use proceeds from the issuance of $3.14 billion second-priority senior secured notes due 2023 to help fund its buyout by Apollo Funds and its merger with Protection 1.

Of that amount of notes, up to $1.89 billion will be sold in a marketed private offering and at least $1.25 billion will be sold to an affiliate of the sponsor and certain other investors in a private placement.

The financing also includes a $1.81 senior secured credit facility.

Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets LLC are the lead banks on the debt. PSP Investments Credit USA LLC is also a committed lender under the debt financing.

Under the agreement, ADT is being acquired for $42.00 per share in cash and merged with Prime Security Services Borrower LLC (Protection 1), a full-service business and home security company also owned by Apollo. When combined with Protection 1, the aggregate transaction value is about $15 billion.

Other funds for the transaction will come from the issuance of $750 million of preferred securities to an affiliate of Koch Equity Development LLC and an equity contribution of about $4.5 billion from funds managed by Apollo and co-investors.

With this transaction, Protection 1 will get a new $255 million revolver, bringing its total combined senior secured revolver to $350 million.

Protection 1 expects that its existing $1,095,000,000 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.

Pro forma for the transaction, the newly created 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.

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

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