Aspect Software hit the bank market last week for a $1.16 billion deal to pay its sponsors, Golden Gate Capital and Oak Investment Partners, a $450 million dividend and refinance existing debt. The new credit cuts pricing on the second lien by 175 basis points, just eight months after the original deal was set. "Yet another frustration in the market," said one portfolio manager. "You have these no asset companies coming back for dividends; it's just really challenging out there."
Michael Provenzano, executive v.p. and cfo, would not comment on why the company is paying out a dividend now, but said Aspect was able to score better pricing for a few reasons. "The company executed on its plan, completed merger integration and [general] market conditions," he said. He would not comment further on the company's operating plan. Moody's Investors Service said revenue and EBITDA year to date are in line with the plan submitted prior to the merger. JPMorgan and Deutsche Bank lead the credit. Officials at the lead banks declined to comment. Calls to officials at Golden Gate and Oak Investment Partners were not returned.
The investor said some of his colleagues also expressed a lack of excitement for the credit and although it is an industry his firm plays in, he is still leery. "It's software, [we're] not sure how it plays out in a restructuring scenario. It's just a difficult deal."
The current financing for the Westford, Mass.-based company consists of a $50 million revolver; a five-year, $725 million first lien and a six-year, $385 million second lien. Pricing on the tranches is LIBOR plus 2 1/2% on the first lien and LIBOR plus 6% on the second. The second lien, which was placed privately, has call protection of 102, 101.
The company last hit the bank market in the fall when Concerto Software and Aspect Communications Corp. merged. The deal was reworked with pricing on the term loan and revolver dropping 25 basis points and $50 million shifted from the second lien to the term loan. The final structure consisted of a $50 million revolver and $475 million term loan "B" both priced at LIBOR plus 2 1/2%. It also consisted of a $200 million second lien priced at LIBOR plus 7 3/4% (CIN, 9/23). JPMorgan and Deutsche Bank led that financing and Provenzano said, "we had a successful financing in the fall; we're happy with their capabilities."
Moody's assigned a B2 to the first lien and a Caa1 to the second lien. It revised the outlook to negative because the dividend will result in an increase in EBITDA leverage of 3.8 times to 5.8 times. Interest coverage will drop to less than 2 times, the ratings agency says. It affirmed the company's B2 corporate family rating, saying it reflects the company's competitive position as one of the largest providers in the contact center software industry, with over 5,000 accounts. Standard & Poor's assigned a B+ rating and 1 recovery rating to the first lien and a CCC+ rating and 5 recovery rating to the second lien.
