Veritas takeover bond relaunched: source

(ADDS details)

By Davide Scigliuzzo

NEW YORK, May 23 (IFR) - The unsecured bond pulled in November to help finance Carlyle's acquisition of Veritas has been relaunched, a source close to the situation told IFR on Monday.

News (Other OTC: NWSAL - news) of the revived deal came shortly after both Moody's and S&P assigned fresh ratings to the overall financing package backing Carlyle's purchase of Veritas from Symantec.

Sources told IFR that Morgan Stanley (Xetra: 885836 - news) , lead-left on the bond when it was pulled, was pitching an unsecured US$825m bond around 88 cents on the dollar to yield around 13%.

The coupon on the bond is 10.5%, the sources said.

"They are pitching hard," said one portfolio manager who was contacted by the bank.

Morgan Stanley was not immediately available to comment.

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

But amid a sell-off in junk bonds and questions about covenant protections in the deal, the financing failed to clear the market.

The structuring was reworked in January to give Symantec US$1bn less in cash from the acquisition.

But Morgan Stanley and other underwriters of the package had to take the debt onto their own balance sheets. When the financing was pulled, the unsecured bond was set to be US$1.775bn-equivalent in size.

Average junk bond spreads have narrowed some 265bp since February 11, but yields on riskier Triple C paper are still at fairly lofty levels of above 16%.

Both Moody's and S&P Global Ratings on Monday rated the new unsecured bond offering at Caa1 and CCC+ respectively.

There is also a secured portion of the bond financing of around US$700m-equivalent of 2023 issues, split between US dollar and euro tranches and carrying a coupon of 7.5%.

Morgan Stanley was pitching that part of the offering at a discount of 90 to 92 cents to the dollar, for a yield of over 9%, the sources said. It (Other OTC: ITGL - news) is not clear when that will be relaunched.

Some of the deal's original underwriters have already sold holdings to Carlyle at a steep discount, IFR reported earlier this month.

Goldman Sachs (NYSE: GS-PB - news) recently cut its exposure, selling around US$22.6m of the bonds at 83.5 cents to the dollar on April 20, a source close to the situation told IFR.

Bank of America Merrill Lynch was lead underwriter on the loan portion of the financing.

UBS (LSE: 0QNR.L - news) and Jefferies also provided debt commitments from the start, while Barclays (LSE: BARC.L - news) , Citigroup (NYSE: C - news) , Credit Suisse (LSE: 0QP5.L - news) and Goldman Sachs later joined the underwriting team with smaller roles. (Reporting by Davide Scigliuzzo; Writing by Marc Carnegie; Editing by Natalie Harrison)