Fusion emerges with reworked credit facilities tranching and pricing

By Sara Rosenberg

New York, April 30 – Fusion downsized its revolver to $40 million from $50 million, added a $40 million four-year first-lien term loan A to its capital structure and upsized its first-lien term loan B to $530 million from $500 million, according to a market source.

The company’s now $680 million credit facilities, up from $620 million, still include a $70 million second-lien term loan.

Also, pricing on the term loan B was increased to Libor plus 750 basis points from talk in the range of Libor plus 675 bps to 725 bps, original issue discount talk was revised to a range of 96 to 97 from a range of 98.5 to 99, the call protection was changed to non-callable for one year, then a 101 soft call for months 13 through 24, from 101 soft call protection for six months, the maturity was shortened to five years from seven years, and amortization was increased to 5% per annum in years one and two and 7.5% per annum thereafter, from 2.5% per annum, the source said.

In addition, pricing on the second-lien term loan was reduced to Libor plus 1,050 bps from Libor plus 1,150 bps, the discount talk was modified to a range of 96 to 96.25 from 97.75, the call protection was revised to non-callable for 18 months, then at 104 for months 19 through 24 and 102 for months 25 through 36, from non-callable for a period to be determined with step-downs, and the maturity was shortened to 5.5 years from 7.5 years.

The term loan B and second-lien term loan still have a 1% Libor floor.

Talk on the newly added term loan A is Libor plus 500 bps with a 1% Libor floor and an original issue discount of 99.5, the source continued.

The term loan A has 101 soft call protection for six months and amortization of 5% per annum for years one and two and 7.5% per annum thereafter.

Financial covenants include a total net leverage ratio, with cash netting capped at $30 million, of below 5 times at second quarter 2018 to third quarter 2018, 4.5 times at fourth quarter 2018, 4 times at every quarter end from first quarter 2019 to fourth quarter 2019, 3.5 times at every quarter end from first quarter 2020 to fourth quarter 2020, and 3 times thereafter.

The deal also has a maximum capex covenant of $55 million per year that grows with new acquisitions, and the unused portion of the $55 million, up to 50%, can be carried forward to the next year. Also, there is a minimum fixed charge coverage ratio for the term loan A and revolver only while the term loan A is outstanding of 1 times, stepping up to 1.25 times on March 31, 2021 and thereafter.

Goldman Sachs Bank USA, Morgan Stanley Senior Funding Inc. and MUFG are the leads on the deal that first launched with a bank meeting on Feb. 15.

Recommitments are due at 4 p.m. ET on Wednesday, the source added.

Proceeds will be used to refinance debt in connection with the all-stock merger of Fusion and the Cloud and Business Services customers, operations and infrastructure of Birch Communications.

Fusion is a New York-based cloud services provider.

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