Priority Technology inks debt commitment for Finxera acquisition

Priority Technology Holdings Inc. disclosed that on March 5 the company entered into a debt commitment letter with Truist Bank and Truist Securities providing a loan package that will be used in connection with the company's planned acquisition of Finxera Holdings, which is expected to close in the third quarter.

The commitment letter outlines a $300 million, six-year covenant-lite initial term loan; a $290 million, six-year covenant-lite delayed-draw term loan; and a $40 million, five-year revolver that will be covered by a maximum total net leverage covenant. Pricing is outlined, tied to a leverage-based grid, at L+425-475, opening at L+475, with a 0% Libor floor.

Net leverage is expected to be below 4.25x, according to an investor presentation, which also outlines that based upon forecast 2021 financials, revenue for the combined companies is expected to be roughly $540 million, with adjusted EBITDA of roughly $130 million.

Proceeds from the initial term loan and revolver are earmarked to refinance existing debt. As of Sept. 30, 2020, the company had $280 million outstanding under its term loan due January 2023 and $11 million outstanding under its revolver due January 2022. Proceeds from the delayed-draw term loan, meanwhile, are earmarked for the acquisition.

Priority has also obtained an up to $250 million preferred equity commitment from funds managed by certain affiliates of Ares Management to fund a portion of the refinancing and the acquisition.

S&P Global Ratings yesterday placed Priority Holdings' CCC+ issuer credit rating and all issue-level ratings on Priority on CreditWatch, with positive implications. Ratings said the action reflected its view that while expected leverage and free cash flow remain uncertain, external liquidity availability will improve through higher revolver access and more advantageous financial covenants, and the combined business will have better scale and higher profitability.

Priority is a provider of merchant acquiring, integrated payment software and corporate payment solutions.