RLPC: SunGard spinoff SunGard Availability preps $1.275B in debt

NEW YORK, March 11 Tue Mar 11, 2014 2:35pm EDT

NEW YORK, March 11 (Reuters) - SunGard Availability Services is coming to market with a $1.275 billion credit in connection with its spinoff from SunGard Data Systems as the underperforming division is sold off, sources told Thomson Reuters LPC.

Net proceeds of the new debt, raised at SunGard Availability Services, will be transferred to SunGard Data Systems as part of the spinoff. SunGard Data Systems plans to use proceeds of the loan to refinance debt that already exists in the SunGard family.

The new credit is split between a $250 million revolver due 2018 and a $1.025 billion term loan B due 2019. The loans will be offered to investors at a lender meeting at 11 a.m. ET on Thursday.

JP Morgan leads the deal.

The spinoff SunGard Availability Services provides disaster recovery services, managed IT services, information availability consulting services and business continuity management software.

SunGard and JP Morgan did not return calls for comment.

In January, SunGard Data Systems announced plans to spin off its Availability Services business on a tax-free basis to its existing stockholders, including its private equity owners. SunGard Data Systems has seen revenue declines in its Availability Services business, particularly traditional recovery services, prompting reports of a possible spinoff for months before the official announcement.

At the end of 2013, SunGard Availability Services constituted about a third of revenue at SunGard Data Systems, according to a company statement.

The independent SunGard Availability Services will have $1.4 billion in revenue, according to the same statement.

For the remaining SunGard Data Systems company, Moody's Investors Service expects that total adjusted debt to Ebitda will be over 6.5 times upon the close of the transaction, according to a January report from the ratings agency.

"The expectation of steady free cash flow will be enhanced with the spinoff of the more capital intensive and declining Availability Services business," Moody's Vice President and Senior Credit Officer Stephen Sohn said of SunGard Data Systems in the report.

In February, SunGard Data Systems amended certain covenants and other provisions on its existing credit to permit the spinoff, including the ability to effect the spinoff without requiring an initial public offering.

Both the resulting SunGard Data Systems and the spinoff SunGard Availability Services will continue to be principally owned by funds associated with Bain Capital Partners, The Blackstone Group, Goldman Sachs & Co., Kohlberg Kravis Roberts & Co., Providence Equity Partners, Silver Lake and TPG.