NEW YORK, Aug 15 (Reuters) - US internet security company DigiCert’s banks have begun sounding out prospective investors about the debt financing that will support the company’s acquisition of Symantec’s web certification business, according to four sources familiar with the matter.
The financing will total US$1.59bn and include a US$1.2bn secured term loan with senior priority, a US$300m secured term loan with junior priority and a US$90m revolving credit facility, two of the sources said. UBS will lead a syndicate of underwriters that includes Credit Suisse, Jefferies, Goldman Sachs and Macquarie Group.
Private equity firm Thoma Bravo-owned DigiCert announced on August 2 it will acquire the US software company’s website security and public key infrastructure unit, which verifies the authenticity of secure websites for web browsers.
The deal comes as Symantec faces scrutiny by Google and other web browsers for the way it validates its web certificates, Reuters has reported. The companies have been negotiating since Google demanded changes to the web certification segment’s technology and business practices in order for its browser, Chrome, to continue honoring Symantec certificates.
As per the terms of the transaction, Symantec will receive approximately US$950m of cash upfront and a 30% stake in the equity of the new entity. The combined company will have an enterprise value of US$4bn, two of the sources said.
Part of the proceeds will go toward refinancing Digicert’s existing capital structure, which was placed in 2015 to back the company’s leveraged buyout. Thoma Bravo will not contribute new equity.
Credit Suisse, Jefferies and Thoma Bravo declined to comment. UBS, Goldman Sachs, Macquarie and the company did not respond to requests for comment.
Pricing is being discussed at 425bp-450bp over Libor with a 1% Libor floor and a 99 original issue discount (OID) for the senior loan and 825bp-850bp over Libor with a 1% Libor floor and a 98.5 OID for the junior tranche, the two sources said.
The combined company’s Ebitda, or earnings before interest, taxes, depreciation and amortization, will be US$300m, the sources added. Net of cash, DigiCert’s debt-to-Ebitda will stand at three and a half times through the senior loan and four and a half times total.
Marketing efforts will officially kick off after Labor Day.
DigiCert will not have audited financials from the carveout of the Symantec business by the time syndication begins and Moody’s Investors Service will not assign credit ratings until they are available, one of the sources said. That could present a challenge for some investors interested in participating in the financing, such as Collateralized Loan Obligations, which base their investment decisions on ratings from Moody’s and Standard & Poor’s. (Reporting by Andrew Berlin; Editing By Michelle Sierra and Lynn Adler)
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