(Bloomberg) -- Carlyle Group Inc.-backed Veritas US Inc. is closing in on a deal to restructure $4 billion of debt it owes next year, according to people familiar with the situation.
The software company has agreed to terms with a group of lenders, and is now seeking an agreement with other creditors, said the people, who asked not to be identified because the discussions are private.
The overhaul would end months of talks between the company and creditors over how to use the $3.6 billion it got from the sale of its data protection business to Cohesity Inc. to deal with the maturing debt. Veritas has battled with its lenders - led by Elliott Investment Management - over how to structure the payouts.
Under terms of the deal, Veritas will use cash proceeds from the sale to help repay $3 billion of its notes and bonds, the people said. Another $600 million of the cash paydown will come from a new margin loan tied to Cohesity that carries a five-year maturity and 11% interest structured as payment-in-kind which would allow the borrower to pay interest with more debt, according to the people. The loan is collateralized by Carlyle’s shares in Cohesity.
Lenders will also receive preferred equity shares in Cohesity, as well as a mixture of cash and take-back paper, which is essentially new debt at the remaining company after the spin-off, the people said.
The lenders will see roughly $722 million of their debt restructured as a new five-year loan that will pay a mixture of 8% cash and 4.5% payment-in-kind- or deferred interest, the people said. Following the transaction, they will also have a $200 million loan - with a three-year tenor - that is backed by Carlyle’s preferred shares in Cohesity, they said. The loan will pay 15% interest in-kind.
Representatives with Elliott, as well as Houlihan Lokey and Davis Polk & Wardwell, who are representing the group of creditors, and company adviser Guggenheim Partners declined to comment, while calls to Carlyle and Veritas were not returned.
During negotiations, Veritas creditors pushed for a par recovery in return for swapping into longer dated debt, said the people. Under the latest deal, lenders calculate they will collect $250 million in preferred shares, as well as around 71 cents on the dollar from the cash paydowns, 17 cents on the take-back debt portion along with other considerations, calculated to provide at least 100% of face value, the people said.
If the remaining company has more than $450 million of debt outstanding upon three years of the transaction’s close, lenders can take Carlyle’s equity in Veritas, including its preferred loans, they said.
--With assistance from Carmen Arroyo.
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