Rackspace increases term loan to $2.3B, firms pricing

Rackspace Technology Inc. increased its proposed term loan B by $100 million, to $2.3 billion, as pricing firmed at the tight end of talk, according to sources. Commitments remain due today at noon ET.

Price talk for the seven-year covenant-lite TLB is L+275, versus guidance of L+275-300 at launch, with a 0.75% Libor floor and an issue price of 99.5. That works out to a yield to maturity of roughly 3.63%. Lenders are offered six months of 101 soft call protection.

Citi is leading the deal, and joint lead arrangers are Barclays, BMO Capital Markets, MUFG, J.P. Morgan, Goldman Sachs, Mizuho, RBC Capital Markets, Credit Suisse, Deutsche Bank, HSBC and Apollo. Citi is administrative agent.

Proceeds from the loan, along with $550 million of seven-year (non-call three) secured notes, will be used to refinance the issuer's existing $2.8 billion covenant-lite TLB due November 2023 (L+300, 1% floor). Note that the size of the secured notes offering was trimmed from $650 million.

For reference, Rackspace also has outstanding $550 million of 5.375% senior unsecured notes due December 2028 that were issued in November 2020 to refinance existing notes.

The term loan drew issue-level ratings of B+/B1, with a 2 recovery rating from S&P Global Ratings. Corporate ratings are B/B2 with positive and stable outlooks.

Rackspace Technology operates as a cloud technology services company.