DRS Technologies, a maker of electronics and systems for defense companies, gave a nod to prospective bondholders last week when it announced the terms of its proposed acquisition financing package of $575 million in five- and 10-year notes. The terms include a noticeably small carve out feature. The prospectus states that the company will be able to spend up to $50 million on shareholder dividend payments and take on up to $50 million in additional debt.
"That's far lower than we have seen on other recent new deals," said Terry Dwyer, an analyst at KDP Investment Advisors, pointing to Massey Energy's $725 million 144A offering in December which had a restricted payments carve-out of $300 million and allowed for $100 million in additional indebtedness. "[DRS's move is made] to appeal to bondholders and get them to play ball."
The company is spending $1.9 billion to purchase Engineered Support Systems. In a presentation to existing and prospective investors last week in New York, DRS executives said the company plans to slow down its acquisition spree. A call to Rich Schneider, cfo, wasn't returned by press time.