Quest Software Inc. has revised terms on the first-lien and second-lien term loans that will back the buyout of the company by Clearlake Capital, according to sources. Recommitments are due by 3 p.m. ET today.
The seven-year first-lien term loan has been upsized by $100 million, to $2.81 billion, and is now offered at a spread of 425 basis points over the secured overnight financing rate, with a 0.5% floor and an original issue discount of 99, from initial guidance of 400-425 bps over Sofr and an OID in the range of 99-99.5. There is now a credit spread adjustment that is 10 bps for a one-month rate, 15 bps for a three-month rate, and 25 bps for a six-month rate, whereas previously there was no credit spread adjustment. Additionally, there is only a 25-bps margin step-down upon an IPO after a 25-bps step-down at 0.5x inside closing first-lien leverage was removed.
At revised terms, yield to maturity is approximately 5.02%. Lenders are offered six months of 101 soft call protection.
The eight-year second-lien term loan was downsized by $100 million, to $765 million, and pricing is now 750 bps over Sofr plus a credit spread adjustment, with a 0.5% floor and an OID of 98.5, from guidance of Sofr+725-750 and an OID in the range of 98.5-99. The credit spread adjustment is the same as the first-lien tranche and was added with the revisions. The facility has hard calls of 102 and 101 in years one and two, respectively. At revised terms, yield to maturity is 8.52%.
Goldman Sachs is left lead arranger on the first-lien tranche, and Morgan Stanley is lead arranger on the second-lien tranche. The full arranger group includes BofA Securities, BMO Capital Markets, Barclays, Citi, Credit Suisse, Golub Capital, HSBC, Security Benefit, Wells Fargo, Citizens, Clearlake Capital, Antares, Deutsche Bank, CBAM, BNP Paribas, SVB, UBS and Stone Point Capital.
Rating agencies have assigned first-lien ratings of B-/B2, with a 3 recovery rating from S&P Global Ratings, and second-lien ratings of CCC+/Caa2, with a 5 recovery rating. Corporate ratings are B-/B3, with a stable outlook from both Ratings and Moody's.
Clearlake Capital has agreed to acquire the company from Francisco Partners in a transaction valued at approximately $5.4 billion inclusive of debt, according to a report from The Wall Street Journal at the time the deal was announced Nov. 29, 2021.
The issuer has a covenant-lite first-lien term loan due May 2025 (L+425, 0% Libor floor) and a second-lien term loan due May 2026 (L+825, 0% floor). The issuer was last in the loan market in September 2021 with a $330 million add-on to its first-lien term loan that backed the company's acquisition of OneLogin.
Quest Software was previously part of the software business of Dell Technologies, which Francisco Partners bought out in 2016 for roughly $2 billion.
Quest Software provides integrated infrastructure software for managing systems, data and applications.
