EXCLUSIVE-Banks shed riskiest debt backing Veritas LBO: source

2 min read
Davide Scigliuzzo

Banks have cleared nearly all of the riskiest debt backing Carlyle’s leveraged buyout of Veritas, after selling US$450m of an unsecured junk bond on Monday, a source close to the situation told IFR.

The four leading underwriters on the deal - Bank of America Merrill Lynch, Morgan Stanley, Jefferies and UBS - placed the 2024 bond with a select group of investors at a discount of 86.5 cents to the dollar to yield 13.35%, the source said.

The bonds traded up a point in the after-market.

Carlyle had originally planned to sell US$5.6bn of debt across loans and bonds to finance its purchase of Veritas, a data storage company, from Symantec.

But underwriters on the deal yanked the financing from the market in November after investors balked at the terms and as sentiment in the leveraged finance market deteriorated.

Barclays, Citigroup, Credit Suisse and Goldman Sachs were also part of the underwriting group with smaller roles.

The structuring was reworked in January to give Symantec US$1bn less in cash from the acquisition. The size of the financing was also reduced by roughly the same amount.

The underwriters were forced to fund the transaction and take the debt on their balance sheets in late January when the acquisition closed.

But after Monday’s sale, the banks have now shifted nearly all of the US$825m unsecured bonds backing the deal.

An unspecified pension fund bought US$250m of the unsecured bonds at par in January, while around US$115m was bought by Carlyle at 83.5 cents to the dollar in recent weeks, the source said.

Morgan Stanley has also sounded out investor appetite for around US$700m-equivalent of secured bonds in US dollars and euros at a discount of 90 to 92 cents to the dollar, for a yield of over 9%, sources close to the situation told IFR.

But the secured bonds are not expected to launch until July at the earliest.

The banks also still need to sell around US$3bn of leveraged loans backing the acquisition.