Wachovia Securities has underwritten a $340 million credit facility backing Veridian's $227 million acquisition of Signal, a provider of information technology and engineering services to the Department of Defense and other U.S. government agencies. In June, Wachovia provided Veridian with a $200 million credit, comprising a $70 million revolver and a $130 million "B" term loan, and the new line is an expansion of that facility, one banker explained. The new money will consist of a $160 million add-on to the term loan. Officials at Wachovia did not return calls.
Pricing on the existing $130 million "B" loan is LIBOR plus 31/ 4%, while the spread on the revolver is LIBOR plus 23/ 4%. New pricing could not be ascertained, but the senior secured bank debt has garnered a Ba3 rating from Moody's Investors Service due to a weakened balance sheet. Pro-forma for the acquisition and refinancing, total debt-to-EBITDA is approximately 3.7 times, which the agency considers high.
A company spokesman said Veridian completed its initial public offering in June, and the $227 million in proceeds were used to restructure the balance sheet. The Arlington, Va., company eliminated high-cost preferred stock that carried a 151/ 4% dividend and subordinated debt with a 141/ 2% coupon.
Veridian now is looking to grow its national security footprint and expand its presence in homeland security markets. "The acquisition provides a presence into civilian agencies," the spokesman said. According to Moody's, the challenge will be to manage both companies effectively, given the absence of overlap in core competencies between Signal and Veridian.