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Open Text gets commitment for $2.59 billion loan, $2 billion bridge
By Sara Rosenberg
New York, Aug. 25 – Open Text Corp. has received a commitment for a $2.585 billion senior secured delayed-draw seven-year final maturity term loan and a $2 billion bridge loan to help fund its acquisition of Micro Focus, according to an 8-K filed with the Securities and Exchange Commission on Thursday.
Barclays, BMO Capital Markets Corp., RBC and Citigroup Global Markets Inc. are acting as lead arrangers on the financing. Barclays is the administrative agent on the term loan and the bridge loan.
Pricing on the term loan is SOFR plus 325 basis points.
Amortization on the term loan is 1% per annum.
The term loan has incremental facility capacity of $250 million plus additional amounts, subject to meeting a consolidated senior secured net leverage of not more than 2.75x.
Covenants under the term loan include a consolidated net leverage ratio of 4.5x.
As for the bridge loan, pricing is SOFR plus 375 bps, stepping up by 50 bps every 90 days until it hits a total cap.
The bridge loan commitments are expected to be reduced by proceeds of certain debt securities offerings.
Under the agreement, Micro Focus is being bought for 532 pence per share, implying an enterprise value of about $6 billion inclusive of Micro Focus’ cash and debt.
The term loan will be used to fund the acquisition, and the bridge loan will be used with $1.3 billion in cash and a $600 million draw on Open Text’s existing revolving credit facility to repay Micro Focus’ existing debt.
Closing is expected in the first quarter of 2023, subject to Micro Focus shareholder approval, the sanction of the Scheme by the Court, and antitrust and foreign investment approvals.
Open Text is a Waterloo, Ont.-based software provider of business-to-business cloud integration services. Micro Focus is a Newbury, England-based enterprise software company.
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