NEW YORK, Nov 17 (Reuters) - US health club software and payment processor ABC Financial Services’ leveraged buyout by private equity firm Thoma Bravo will be backed by US$375m of loans, according to three sources familiar with the matter.
The financing is structured as a US$260m term loan with a first priority claim and a US$115m term loan with a second priority claim, the sources said.
The loans will be provided by Jefferies, Macquarie Capital and Antares Capital, according to a press release.
Thoma Bravo, Jefferies, Macquarie and Antares declined to comment. The company did not respond to requests for comment.
The new loans will put the company’s net debt-to-Ebitda, or earnings before interest, taxes, depreciation and amortization, at 4.6 times through the senior tranche and 6.8 times through the junior tranche, based on US$54m of last 12 months’ Ebitda at September 30 and US$10m of balance sheet cash at close.
While in excess of the six times leverage cap advanced by regulators including the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency in 2013, the institutions providing financing for ABC Financial are not subject to the guidance and can espouse looser underwriting standards.
Leverage over six times on software buyouts isn’t unusual, as the industry often generates strong enough cash flows to repay a minimum of 50% of total debt within the five- to seven-year window stipulated by regulators.
The buyout, announced on November 8, is expected to close by the end of the year. (Reporting by Andrew Berlin; Editing By Michelle Sierra and Lynn Adler)