First Advantage outlines $1.82 billion term loan expected pricing

By Sara Rosenberg

New York, March 1 – First Advantage Corp. anticipates its proposed $1.82 billion seven-year senior secured incremental covenant-lite term loan to be priced at SOFR plus 325 basis points with two 25 bps step-downs at first-lien leverage of 0.5x and 1x less than at closing and a 0% floor, based on the commitment letter filed in an 8-K with the Securities and Exchange Commission on Friday.

In addition, the term loan is expected to have 101 soft call protection for six months and amortization of 1% per annum.

The company also has a commitment for a fungible $150 million incremental five-year revolving credit facility and an extension of its existing $100 million revolver due July 31, 2026 to a five-year maturity from closing, for total revolver capacity of $250 million.

BofA Securities Inc., Barclays, BMO Capital Markets, Jefferies LLC and RBC Capital Markets are the lead arrangers and bookrunners on the deal. Bank of America is the administrative agent.

Proceeds from the term loan will be used to help fund the acquisition of Sterling Check Corp. and retire existing Sterling debt.

Under the agreement, Sterling is being purchased for about $1.2 billion in cash and 27.15 million shares of First Advantage common stock. Sterling shareholders will elect to receive either $16.73 in cash or 0.979 shares of First Advantage common stock for each Sterling share. The shareholder election will be subject to proration, resulting in around 72% of Sterling’s shares being exchanged for cash consideration and 28% being exchanged for First Advantage common stock. Sterling shareholders are expected to own about 16% of the combined company after closing, and current First Advantage shareholders will own around 84%.

The combined company is expected to have $1.5 billion in annual revenue and $473 million in adjusted EBITDA, including run-rate synergies.

Pro forma net leverage is estimated to be around 4x, with the long-term goal being to reduce leverage to between 2x and 3x.

Closing is expected in the third quarter, subject to regulatory approvals, clearances and other customary conditions.

First Advantage is an Atlanta-based provider of employment background screening, identity and verification solutions. Sterling is an Independence, Ohio-based provider of background screening and identity services.

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