(Bloomberg) -- ViaPath Technologies has completed a $1.38 billion refinancing transaction after temporarily pausing the process following new regulations from the Federal Communications Commission that curtail how much the prison-communications provider can charge for calls.
The five-year, first-lien leveraged loan, led by Texas Capital Bank, comes with a margin of 7.5 percentage points over the Secured Overnight Financing Rate, according to people with knowledge of the matter who asked not to be identified because the information is private. That is the same margin discussed with lenders before the FCC proposed rule changes in late June to cap rates on phone and video calls.
However, ViaPath lowered the discounted price to 96 cents on the dollar, compared to earlier discussions of 98 cents, making terms more favorable to lenders, the people said.
A margin of 7.5 percentage points over the benchmark rate is the highest so far this year in the US leveraged loan market, according to data compiled by Bloomberg. A spread that high was last seen in late December, when Northeast Grocery Inc. snagged a $550 million term loan — also for a refinancing transaction — at a discounted price of 97 cents.
As part of the transaction, ViaPath also received a new $150 million super-priority revolver, one of the people added.
Representatives for private equity firm American Securities, which owns the company, and Texas Capital Bank declined to comment. A representative for ViaPath didn’t immediately provide a comment.
Clinching a refinancing transaction was crucial for the company as it rolls over debt maturing in 2025 and 2026. ViaPath began working on the transaction months ago, Bloomberg reported in April, and was on track to wrap up the deal on July 2.
ViaPath then ended up placing the deal on hold to give itself and its investors time to understand how the new regulations proposed by the FCC could impact the business.
The FCC unanimously passed the new rules on July 18, which drastically reduce the cost of audio calls, impose brand-new caps on video services and prohibit providers from making commission payments to the jails and prisons in which they operate.
Companies associated with the prison industry have been facing backlash from environmental, social and governance-focused investors in recent years. ViaPath’s rival — Platinum Equity-backed Aventiv Technologies — has been working to address its obligations and reached a deal with lenders to sell itself sometime in the next year, Bloomberg reported in March.
The margin on ViaPath’s loan will step down to 7 percentage points when first-lien leverage, a measure of debt to earnings, is below 3.35 times, the people said. The loan is not callable for the first year, the people added. After that, the loan is callable at 102 cents on the dollar in the second year and 101 cents in the third year, they said.
ViaPath was previously known as Global Tel*Link or GTL.
--With assistance from Ellen Schneider and Andrew Kostic.
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