Barclays Preps $1.6B Loan for ADT Takeover, the Biggest LBO of 2016

 | Apr 06, 2016 | 5:15 PM EDT
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Security giant ADT (ADT) is off to a fantastic 2016, with shares up nearly 26% on the year, primarily because of the $6.9 billion leveraged buyout offer from Apollo Global Management (APO). 

But now it's time to start pulling the debt financing together to back ADT's megadeal, and sources tell Real Money that Barclays (BCS) will be stepping up to the plate tomorrow, launching a six-year $1.56 billion leveraged loan to help back the deal to investors who are keen to take on sub-investment-grade investments in exchange for steep interest payments.

The loan, rated two and three notches below investment grade by Moody's and Standard & Poor's, respectively, will be presented to investor's Thursday with Barclays acting as the lead underwriter, a source close to the deal told Real Money on the condition of anonymity because the terms are private.

The facility is particularly speculative in that it is a so-called "covenant-lite" deal, meaning it lacks the traditional maintenance covenants that protect lenders, such as routine check-ups on leverage, the person said. The deal will also include a $255 million revolving credit facilty, essentially the equivalent of a corporate credit card, and Citigroup (C), Deutsche Bank (DB), and RBC (RBC) are secondary bookrunners, he added.

As Real Money reported, the takeover by Apollo -- a fund whose deals are frequent tappers of the leveraged loan market -- was approved unanimously by the Boca Raton, Fla.-based security giant's board of directors in February. That announcement immediately caused shares to spike about 50%, pulling ADT shares up about 26% on the year. 

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