JPMorgan held preliminary meetings last Wednesday with a select group of investors in preparation for the syndication of the $4 billion term loan "B" backing the $11.4 billion leveraged buyout of SunGard by a club of blue-chip buyout shops. A bank meeting to launch syndication of the eagerly awaited debt has been set for July 7.
Large institutional accounts were shown business plans and the capital structure, noted one potential lender. He said the meetings were a way to get investors interested and working on the deal early. Total leverage is expected to be around seven times. "Software can be a pretty decent business," he said, noting the company has attractive recurring revenues.
"It's a large, big, liquid kind of deal," said a different investor. "There is a lot of interest; people have been waiting for this transaction for a while." He cited the company's stable revenue and strong customer base of financial institutions, such as banks, brokerages and insurance companies as positives.
The bank portion consists of a six-year, $1 billion revolver, which will be decreased to $750 million if the bridge or holdings notes are funded at closing of the merger, and the $4 billion, seven-and-half year term loan. Pricing is expected to be in the LIBOR plus 2 1/2- 3/4% range for the institutional loan. The company is also expected to issue $3 billion of senior unsecured and/or senior subordinated notes. If the note offering is not completed, the banks have agreed to provide up to $3 billion in bridge financing.
JPMorgan and Citigroup are the co-lead arrangers for the facility, and JPMorgan, Citigroup and Deutsche Bank are joint bookrunners. Goldman Sachs and Morgan Stanley also have syndication roles. Reportedly, a number of banks have already signed onto the revolver, and one investor said commitments have been circled on the $1 billion line. Credit Suisse First Boston, which is being paid a fee of $35 million, is an advisor but not a lead arranger.
According to the proxy filing, CSFB was contacted last November by Glenn Hutchins, a co-founder of Silver Lake Partners and Egon Durban, a director, about buying the company. In March, the board authorized CSFB to offer to provide debt financing to the investor group. But based on the progress of Silver Lake's discussions with other debt financing sources, it was decided that there was no need for CSFB to provide any debt commitment letters.
By March a consortium had been formed to provide the equity financing to back the transaction. In addition to Silver Lake, Kohlberg Kravis Roberts & Co., Bain Capital, The Blackstone Group and Texas Pacific Group are putting in $540 million of equity each. Goldman Sachs Capital Partners is putting in $500 million and Providence Equity Partners is putting in $300 million of equity.
Based in Wayne, Pa., SunGard provides integrated software and processing solutions for financial services. Mike Ruane, cfo, declined to comment. A spokesman at SunGard did not return calls. A spokeswoman for KKR referred calls to a Silver Lake spokesman who declined comment. A spokesman for Bain declined to comment. Calls to the other firms were not returned. A JPMorgan spokesman also declined comment.
