Daily News: January 10, 2019

Citibank Agents $2.1B+ Term Loans to Support SAIC/Engility Merger

Citibank served as both administrative and collateral agent on a $1.05 billion senior secured term loan B credit facility and a $1.068 billion senior secured term loan A credit facility as part of an amended and restated credit agreement with Science Applications International

According to a related 8-K filing, the amended agreement facilities will be used to support SAIC’s acquisition of Engility Holdings, a provider of engineering and logistics services to several U.S. military and civilian agencies.

In addition to the two new term loans, the amendment also established the term loan A will be automatically reduced to $618 million if the Engility merger is terminated or abandoned, while SAIC’s existing $200 million revolver will be increased by an additional $200 million if the merger successfully closes.

The amended agreement is secured by substantially all of the assets of SAIC and SAIC’s domestic subsidiaries and a pledge of the equity interests in such domestic subsidiaries.

The term loan B was funded in full and the proceeds were used to repay all indebtedness for borrowed money under SAIC’s prior credit agreement. Proceeds under the revolver will be available for general corporate purposes.

Borrowings under the agreement will bear interest at a variable rate of interest based on LIBOR or a base rate, plus in each case an applicable margin. Applicable margins on the term loan B will be 1.75% for LIBOR loans and 0.75% for base rate loans. Margins on the revolver will range from 1.25% to 2.00% for LIBOR loans and from 0.25% to 1.00% for base rate loans, each based on the then applicable leverage ratio.

Borrowings under the term commitment will amortize quarterly beginning on January 31, 2020 at 1.25% of the original borrowed amount thereunder, with such quarterly amortization payments increasing to 1.875% on January 31, 2021 and then to 2.50% on January 31, 2022. The term loan B will amortize quarterly at 0.25% of the original borrowed amount beginning on January 31, 2019. Beginning with SAIC’s fiscal year ending on or about January 31, 2020, annual mandatory prepayments of a portion of SAIC’s excess cash flow will be required.

Borrowings under the term commitment and the revolver commitment mature on October 31, 2023. The term loan B matures on October 31, 2025. Closing on the merger is expected for February 2019.

Shearman & Sterling advised Citibank on the transaction.

Headquartered in Reston, Virginia, Science Applications International is a technology integrator which provides full life cycle services and solutions in the technical, engineering, intelligence and enterprise information technology markets, with clients primarily situated in the U.S. federal government. It currently employees 15,000 staff members.