Brocade targets April 11 week to launch $900 million credit facility

By Sara Rosenberg

New York, April 4 – Brocade is anticipated to hold a bank meeting during the week of April 11 to launch a $900 million five-year senior secured credit facility to help fund its acquisition of Ruckus Wireless Inc., according to a market source.

Wells Fargo Securities LLC, Deutsche Bank Securities Inc. and SunTrust Robinson Humphrey Inc. are the joint lead arrangers and joint bookrunners on the deal.

The facility consists of a $100 million revolver and an $800 million term loan A.

Based on an 8-K filed with the Securities and Exchange Commission on Monday, pricing on the revolver and term loan A is expected initially at Libor plus 150 basis points. The spread can range from Libor plus 100 bps to 175 bps based on total leverage.

Initially, the commitment fee on the revolver will be 30 bps. The fee can range from 20 bps to 35 bps based on total leverage.

Amortization on the term loan A is 10% per annum.

Covenants include a maximum total leverage ratio of 3.5 times subject to step-downs to 3.25 times for the fiscal period ending on or after April 30, 2017 and to 3 times for the fiscal period ending on or after April 30, 2018, and a minimum interest coverage ratio of 3.5 times.

Under the agreement, Ruckus stockholders will receive $6.45 in cash and 0.75 of a share of Brocade common stock for each share of Ruckus common stock. Based on the closing price of Brocade’s stock on April 1, the transaction values Ruckus at a price of $14.43 per common share, or about $1.5 billion.

The cash portion of the purchase price will be funded through the new term loan and cash on hand.

Closing is expected in Brocade’s third fiscal quarter of 2016, subject to customary conditions, including reviews by U.S. and international antitrust regulators and the tender of a majority of the outstanding shares of Ruckus’ common stock.

Brocade is a San Jose, Calif.-based provider of networking solutions. Ruckus is a Sunnyvale, Calif.-based manufacturer of wireless networking equipment.

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