LogMeIn rolled out a host of covenant changes today to its LBO term loans, after the deal faced scrutiny for allowing lender-unfriendly maneuvers such as the spinout of assets, according to two sources following the situation.
In December, LogMeIn agreed to be sold for USD 4.3bn to affiliates of Francisco Partners and Elliott Management. Francisco will take a majority stake in the software company, while Elliott will assume a minority share, with the sponsors collectively writing a roughly USD 1.4bn equity check for about 30% of total capitalization.
The company is a provider of software as a service (SaaS) and cloud-based remote connectivity services for collaboration, IT management and customer engagement. The LBO financing is split between a USD 1.95bn first lien term loan, a privately placed USD 500m second lien term loan, a USD 750m unsecured bond and a USD 250m revolver.
Lead Barclays outlined price talk on the first lien term loan at Libor+ 475bps-500bps with a 97 OID. Timing was accelerated to 5pm ET today (13 August) from 14 August previously.
Barclays set talk for the bonds at 5.5%-5.75%, with books closing at 4pm ET today. Whispers previously circulated in the low-6% area. The bonds are three times oversubscribed as of this afternoon, one of the sources said.
Sources were concerned with the company’s ability to separate its businesses, including GoToConnect, a unified communications as a service (UCaaS) business; LastPass; and Bold360, a digital engagement business, as reported.
As such, under the new agreement, investments in unrestricted subsidiaries/JVs are limited to the greater of USD 180m/30% of EBITDA, compared to the greater of USD 270m/45% of EBITDA previously. The asset sale step-downs were also removed.
Investments in non-guarantors are now limited to the greater of USD 250m/42% of EBITDA from the greater of USD 300m/50% of EBITDA previously.
The 101 soft call premium was extended to 12 months from six months, the sources said.
The MFN clause also raised some questions among investors as to the amount of carveouts permitted, as reported. In response, all of the carveouts were removed, and the economics were tightened to 50bps for 18 months, compared to 75bps for six months.
Additionally, the unused RP capacity builder was removed, with the general restricted debt payment basket limited to the greater of USD 125m/20% of EBITDA, compared to the greater of USD 150m/25% of EBITDA in the original documents.
The EBITDA definition was revised to a 25% cap on pro forma adjustments from 30% previously, and the unlimited addback for pro forma impact of price increases was removed.
As for incurring debt, the general debt basket was tightened to the greater of USD 180m/30% of EBITDA, compared to the greater of USD 270m/45% of EBITDA.
Barclays declined to comment. LogMeIn did not respond to a request for comment.