LONDON, Jan 11 (Reuters) - Banks are preparing to launch a US$5.5bn-equivalent leveraged loan backing UK software company Micro Focus International’s acquisition of Hewlett Packard Enterprises’(HPE) software business, banking sources said.
JP Morgan is leading the corporate leveraged loan, which is the largest-ever sole underwrite of an institutional term loan for a European company, one of the sources said.
JP Morgan has been joined by Barclays, HSBC and RBS on the dual-currency, all senior loan, which is due to launch to general syndication in early February, the sources said.
Syndication follows a pre-marketing breakfast held in Europe in December that was used to introduce European investors to an issuer well known in the US already, the sources said.
The US$5bn term loan will include around 1bn for European investors. There is also a US$500m revolving credit facility, which Bank of America Merrill Lynch has joined, the sources said.
Leverage will total around 3.3 times Ebitda and the company has a two-year goal to reduce that to 2.5 times.
The loan is expected to attract a lot of interest from institutional investors eager to put new money to work following a lack of event-driven financings.
There is also expected to be significant appetite from banks for the term loan paper, as an increasing number of banks see leveraged loans as a viable and attractive place to park money.
Micro Focus declined 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 combined company will operate under the name Micro Focus.
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)