| NEW YORK, April 7
NEW YORK, April 7 Data analytics firm Qlik
Technologies is in the market with a US$1.07bn loan refinancing
that is expected to halve the interest margin on a highly
leveraged loan that it raised from direct lenders less than a
year ago to finance its US$3bn sale to private equity firm Thoma
Thoma Bravo financed the take private acquisition with a
record US$1.075bn unitranche loan that was provided by a group
of alternative capital providers led by business development
company Ares Capital Corp in mid 2016 after traditional bank
lenders were unable to match the debt or leverage on offer.
Qlik is one of a host of highly leveraged US companies that
are taking advantage of white hot demand from institutional loan
buyers desperate for higher yields and floating rate assets in a
rising interest rate environment to refinance existing loans.
Issuers booked a record US$261bn in opportunistic
refinancings in the first three months of 2017, pushing average
first-lien institutional term loan spreads to 343bp, excluding
Libor floors or Original Issue Discounts, according to LPC data.
“I would say that demand seems very strong right now. It’s
certainly a reason why Qlik can price a deal,” a banking source
Alternative lenders have been picking up business from
traditional banks since 2013, when federal regulators introduced
leveraged lending guidelines to curb leverage and restrict
capital to reduce systemic risk in the banking sector.
This time, Qlik has turned to traditional banks Morgan
Stanley and Goldman Sachs to lead its new loan. The two leads
are selling the deal on the back of the company’s improved
performance and reduced leverage, which at less than 5.0 times
total debt-to-Ebitda is now in line with the guidelines
requiring extra scrutiny when leverage exceeds 6.0 times.
“Fast forward and the company has recognized nearly all of
the cost cuts that were projected, and at the same time Ebitda
has grown very nicely,” the banking source said.
The refinancing swaps Qlik’s unitranche loan for a single
first-lien term loan B. The deal is helping the company to cut
nearly 500bp off the spread, which will save about US$50m in
interest expense, according to Moody’s Investors Service.
Unitranche loans are typically seen on small to mid-sized
buyouts and are popular with investors for high yields and
private equity firms for ease of execution and certainty of
funding in volatile or capital constrained markets. The loans
offer senior and subordinated debt in one instrument with a
blended cost of capital and average yields of 8-9%.
Moody’s gave the new deal B3 corporate family and first-lien
facility ratings and expects the company to generate 2017
revenues of approximately US$785m with average annual sales
growth of more than 10% in the next two years.
The spread on the US$75m revolver and the US$995m term loan
is guided at a range of 350bp-375bp over Libor, down from 825bp
over Libor on the unitranche loan. The term loan has a 1% Libor
floor and is offered at a discount of 99-99.5.
Traditional banks subject to US leveraged lending guidelines
and tough regulatory capital requirements were unable to lend to
Qlik’s original deal in June 2016 given the amount of debt
required, several banking sources said.
Alternative lenders not subject to leveraged lending
guidelines took big losses on deals that failed to syndicate in
the fourth quarter of 2015, which reduced balance sheet capacity
and they pulled back from lending.
Although a syndicated deal was available, the unitranche
loan offered certainty of close and pricing that the syndicated
loan was unable to guarantee, a second banker said.
At US$1.075bn, the deal was too large for any single direct
lender and Qlik assembled a group of about 10 lenders after
going out to more than 20, the banking source said.
Ares Capital led the deal, which was one of the biggest-ever
provided by a business development company, together with joint
arrangers Golub Capital, TPG's credit specialist TSSP and
Varagon Capital Partners.
Unitranche loans typically carry higher prepayment
penalties. Qlik’s original unitranche loan has a premium of 105
cents on the dollar if the loan is repaid, which the company
will have to pay to do the current refinancing. The new loan has
call protection of 101 for six months.
If Qlik completes its proposed refinancing, three holders of
the loan, ARCC, TSLX and GBDC - business development companies
managed by Ares Capital, Golub Capital and TSSP, respectively -
should be fully repaid, according to a Wells Fargo equity
Qlik’s cost saving will cover the cost of paying the call
protection in just over a year, the first banking source said.
(Reporting by Leela Parker Deo and Jonathan Schwarzberg;
Editing By Tessa Walsh)