| LONDON, March 30
LONDON, March 30 A highly anticipated
US$5.5bn–equivalent leveraged loan backing UK software company
Micro Focus International’s acquisition of Hewlett
Packard Enterprises’(HPE) software business is set to
launch to syndication on Friday, banking sources said.
JP Morgan is leading the corporate leveraged loan, joined by
Barclays, HSBC and RBS on the dual-currency financing, which is
one of the largest leveraged loans to launch this year.
The financing will be offering a bout of new paper to the
market, something craved by cash-rich investors eager to put new
money to work, fed up with a surge of repricings and
refinancings of existing deals that have so far dominated both
the US and European leveraged loan markets of late.
Banks are also likely to be attracted to the deal, as
leveraged finance becomes an increasingly attractive place for
them to invest, as one of the few profitable practices left amid
a low yield environment.
“The new paper will be easily absorbed by investors. Banks
will also be all over it as they have money to put to work.
Banks will also be hoping to guarantee a spot on the next
mandate, be it an IPO or sale,” a leveraged finance investor
The US$5bn term loan is expected to be all-senior and will
include around €1bn for European investors, as well as a US$500m
revolving credit facility, which Bank of America Merrill Lynch
has joined, banking sources said previously.
Leverage will total around 3.3 times Ebitda and the company
has a two-year goal to reduce that to 2.5 times.
Micro Focus was not immediately available to comment.
The US$8.8bn merger, which was announced in September, is
structured as a reverse takeover and is expected to close in the
third quarter of 2017. The deal will be funded through the
issuance of Micro Focus shares representing 50.1% of the
combined group to HPE and a pre-completion cash payment of
US$2.5bn from HPE Software to HPE.
The loan will support the pre-completion cash payment by HPE
Software, finance a US$400m cash distribution to current Micro
Focus' shareholders, pay fees and royalties as well as refinance
Micro Focus’ outstanding debt of around US$1.6bn.
Headquartered in Newbury, Micro Focus had a market
capitalisation of £4.45bn before the deal. It has been snapping
up software companies but this is its largest deal to date. Last
year it acquired US firm Serena Software for US$540m.
(Editing by Christopher Mangham)