July 31, 2013 / 3:36 PM / 6 years ago

RLPC: Reynolds & Reynolds tightens pricing on $3.4B recap credit

July 31 (Reuters) - Automotive dealer software company Reynolds & Reynolds cut pricing guidance on its $3.4 billion dividend recapitalization loan, sources said.

The new credit includes a $550 million, five-year term loan to be marketed to collateralized loan obligation (CLO) investors, a $1.75 billion, seven-year term loan B, and a $1.1 billion, 7.5-year second-lien term loan.

The $550 million shorter-dated tranche is now guided at LIB+275, with a 1 percent Libor floor, at 99.5.

At launch, that loan was guided at LIB+325, with a 1 percent Libor floor, at 99.5.

The $1.75 billion TLB is now guided at LIB+325-350, with a 1 percent Libor floor, at 99.5. At launch, price talk on the TLB was LIB+400, with a 1 percent Libor floor, at 99.

The $1.1 billion second-lien term loan is now guided at LIB+700-725, with a 1 percent Libor floor, and a 99 issue price. This is tightened from initial guidance of LIB+775, with a 1 percent Libor floor, at 98.5.

Deutsche Bank is sole lead. Commitments are due at 3 p.m. EST on Thursday.

Corporate family ratings are B/B3, while first-lien ratings are B+/Ba3 and second-lien ratings are CCC+/Caa1.

The CLO tranche and the TLB are expected to carry 101 soft call protection for one year. The second-lien term loan is expected to be non-callable in year one, then 102, 101.

The CLO tranche and TLB are expected to have maximum leverage covenants. The second-lien is expected to have no covenants. The TLB is expected to amortize at 1 percent annually, while the second-lien is expected to have no amortization.

The new credit backs owner Bob Brockman’s attempt to tax-efficiently take cash out of the company.

Brockman is the controlling shareholder of Reynolds & Reynolds through the Brockman trust, with a roughly 93 percent interest. He was appointed Chairman and CEO of Reynolds & Reynolds in October 2006, upon the acquisition of Reynolds and Reynolds by Universal Computer Services, Inc (UCS).

Through the new dividend recap transaction, 20 percent of the company will go to Brockman’s alma mater, Centre College in Danville, Kentucky, as the 73 year-old Brockman makes ownership changes likely as part of estate planning, sources said.

The company is also paying out a $2.5 billion dividend to shareholders, which will largely go to Brockman.

The dividend recap will add $4.3 billion of debt onto the auto software company, consisting of a $3.4 billion leveraged loan and a $900 million PIK note. The PIK note will be at the parent company, which is not an operating entity and holds no assets.

Reynolds & Reynolds is a provider of automotive retailing for car dealers and automakers in the United States, Canada, U.K., and Europe. The company is headquartered in Dayton, Ohio.

Prior to the acquisition of Reynolds & Reynolds by UCS, Brockman was Chairman and CEO at UCS. Brockman founded the original UCS in 1970.

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