Amentum preps launch of $1.293B term loan for PAE acquisition

Amentum Government Services Holdings LLC is preparing to launch a $1.293 billion seven-year first-lien term loan to finance its acquisition of PAE Inc., according to sources. The J.P. Morgan-led deal will launch with a lender call that is scheduled for 2 p.m. ET on Feb. 1.

Amentum in October 2021 agreed to acquire Nasdaq-listed PAE for $10.05 per share in an all-cash transaction valued at $1.9 billion, including the assumption of debt. J.P. Morgan, RBC Capital Markets, BofA Securities, Goldman Sachs, and Citizens committed to provide $1.943 billion of secured financing to back the deal, comprising the first-lien term loan, a $100 million revolving credit facility, and a $550 million second-lien term loan. Closing of the acquisition is expected in the first quarter.

The new first-lien term loan will not be fungible with the company's existing facilities. Amentum's outstanding debt includes an initial covenant-lite first-lien term loan due January 2027 that totaled $1.09 billion when it was issued in January 2020 to finance the buyout of the company by Lindsay Goldberg and American Securities. Pricing at issuance was L+400, with a 0% Libor floor, and with two leverage-based step-downs of 25 basis points and an additional 25 bps step-down upon an IPO. Financing for the buyout also included a $335 million second-lien term loan due January 2028. The issuer returned to market in October 2020 with a $980 million incremental first-lien term loan due January 2027 priced at L+475, with a 0.75% floor and no step-downs, to finance the $1.055 billion acquisition of DynCorp.

PAE is also a loan market issuer with a first-lien term loan financing due October 2027 (L+450, 0.75% floor) that had roughly $886 million outstanding as of Sept. 26, 2021.

Amentum, currently rated B/B2, is a contractor to the U.S. federal government, serving various departments and agencies, including the Department of Defense, Department of State and Department of Energy, as well as departments and agencies of allied governments, such as the U.K. Nuclear Decommissioning Authority and the U.K. Ministry of Defence.