US government-focused management and technology consultancy Booz Allen Hamilton is considering a possible refinancing that would fund a special dividend of up to US$1bn.
The company’s management is considering undertaking a US$1.75bn financing…
US government-focused management and technology consultancy Booz Allen Hamilton is considering a possible refinancing that would fund a special dividend of up to US$1bn.
The company’s management is considering undertaking a US$1.75bn financing comprising US$1.25bn of new senior secured term loans and a US$500m revolving credit facility.
Proceeds from the facilities would initially be used to replace approximately US$959m of outstanding senior secured debt. The remainder would then be used, alongside cash on hand of up to US$260m, to pay a special dividend to its shareholders of up to US$1bn.
In connection with the proposed refinancing, Booz Allen stated that it intends to provide potential financing sources with an information memorandum containing certain unaudited consolidated EBITDA information, as defined in the company’s existing credit agreement, for the fiscal years ended 31 March 2010, 2011 and 2012 which have not been previously publicly reported.
Assuming board approval, Booz expects the refinancing to close on or about 31 July 2012.
The plan comes as something as a surprise given that Booz has only just paid a special dividend of US$200m to its shareholders on 29 June 2012.
Indeed, despite Booz referring to the favourable credit environment, ratings agency Moody’s was sceptical of the move arguing that the funding the US$7.55 per share dividend would needlessly put pressure on the company’s leverage during a period of uncertainty for its core government business.
The agency stated: “In Moody’s opinion, the dividend recap transaction being considered would indicate a reversion towards an aggressive financial policy by Booz Allen given the large size of the proposed dividend during a period of uncertainty as to future government spending, particularly in the defence sector. The meaningful increase in debt that would be used to finance the proposed dividend would weaken credit metrics considerably and would most likely result in a downgrade of the company’s ratings.”
Booz’s existing debt consists of a US$473m 2.49% senior secure term loan A due 2016 and a US$492.6m senior secured term loan B due 2017. The company also has an untapped US$250m revolving credit facility due July 2014.
While Booz is publically listed on the NYSE, private equity firm Carlyle retains a holding of more than 70% and controls four members of the ten man board.
