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Push/Pull Begins On Mammoth SunGard Financing

Investors have started jostling for concessions on the institutional debt backing the $11.4 billion acquisition of SunGard Data Systems.

Investors have started jostling for concessions on the institutional debt backing the $11.4 billion acquisition of SunGard Data Systems. Call protection and limits on the sponsors' ability to take out dividends are near the top of the list as the leads attempt to round up commitments on a $3.5 billion term loan. A bank meeting on Thursday at the St. Regis Hotel in New York kicked off official syndication, but lead JPMorgan held one-on-one meetings with large buyside accounts a week earlier to gain momentum on the deal (LMW, 7/4).

Pricing on the institutional piece has gone out at a healthy LIBOR plus 2 3/4%, but several investors and dealers commented that it will need bells and whistles considering the sheer size of the deal. "It's the largest transaction down the pipe since RJR Nabisco!" exclaimed one portfolio manager. "The question is, does it test the limitations of the marketplace."

"In order for this to clear, it has to be a top hold for every participant in the marketplace," a second buysider said. "It's a big deal and everyone has to participate in a meaningful way and that's the challenge and that is why it is being priced at 275. I think people feel [that price] is necessary in order to get the deal done; that's an attractive coupon at that rating." Moody's Investors Service assigned a B1 rating for the bank debt, reflecting the seven times pro forma leverage--including an off-balance sheet securitization. A group of investors have also hinted at the intent to ask for a limitation on the company's ability to take a dividend, specifically the ability to issue holdco discount notes.

Originally, the term loan "B" was slated to be $4 billion, but the banks have carved out a $250 million U.K. tranche and a $250 million euro-denominated portion. A liquid European market could enable the banks to shift more money into the non-U.S. tranches, said the buysider. A $1 billion revolver, priced at LIBOR plus 2 1/2%, has largely been accounted for, noted a JPMorgan spokesman, who added that reaction to the facility has been positive.

The first investor did note that in addition to the ability to move money around the structure, the leads have also been able to round up money from non-institutional sources, such as foreign banks. "The deal will get done, it is just a matter of the arrangers, the number of banks they bring in, how much do they [the banks] have to take in the end," explained another investor who said accounts seem generally enthusiastic about the deal.

The big question on the minds of portfolio managers is also whether to wait until the deal moves into the secondary market. "You have the issue of how this thing trades. Are you better off buying in the secondary?" one asked. Another thought is how the bonds are priced with $3 billion of high-yield prepared to be sold.

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. A consortium including Silver Lake Partners, 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.

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