Virtusa pitches $130M add-on bond offering for dividend recap

Virtusa Corp. has pitched a $130 million add-on to its existing 7.125% senior unsecured notes due Dec. 15, 2028, to fund a shareholder distribution. Bookrunners for the deal are BofA Securities, Barclays, Deutsche Bank, Goldman Sachs, HSBC and Nomura.

Proceeds from the tack-on, along with those of a seven-year, $590 million incremental first-lien term loan and cash on hand, will be used to fund a dividend totaling approximately $748 million and to repay a $13 million revolver draw, according to Moody's.

Virtusa is a global provider of digital strategy, digital engineering and IT services. The existing $300 million of the bonds were put in place at par in December 2020 to support a buyout of the company by Baring Private Equity Asia. Trade data shows that the notes closed the session Feb. 4 at 101.25%, to yield 6.75%. The paper will first become callable on Dec. 15, 2023, at par plus 50% of the coupon.

The unsecured notes are rated CCC+/Caa2, with a recovery rating of 6 at S&P Global Market Intelligence. First-lien facility ratings are B/B2, with a 3 recovery rating. Corporate ratings are B/B3, with stable outlooks. Austin HoldCo Inc. is the borrower.

Ratings said Jan. 31 that Virtusa's planned debt transactions "will cause its pro forma S&P Global Ratings-adjusted leverage to rise to 6.8x for the 12 months ended Sept. 30, 2021, from 3.9x previously." However, the agency does expect the company to reduce its leverage "on continued solid revenue and earnings growth over the next year."