Secure wireless communications technology developer TeleCommunication Systems (TCS) has closed a new US$80m credit facility that will partially be used to fund its acquisition of next generation 9-1-1 software and solutions provider microDATA GIS.
The…
Secure wireless communications technology developer TeleCommunication Systems (TCS) has closed a new US$80m credit facility that will partially be used to fund its acquisition of next generation 9-1-1 software and solutions provider microDATA GIS.
The financing is split between a US$45m 4% senior secured term loan and a US$35m revolving credit facility. Silicon Valley Bank led the transaction with M&T Bank and GE Capital Bank joining TCS’ lending group.
The term loan replaces TCS’ existing US$19m loan and will predominantly be used to fund the US$20m cash potion of its US$37m microDATA acquisition. The revolver was an extension of an existing facility.
Commenting on the financing, Tom Brandt, TCS’ chief financial officer, said: “The support we have received from the lending community reflects their confidence in our business model, the strength of our balance sheet and the recognition of our management’s prudent outlook for the management of cash flow.
“Our company’s convertible debt is due in about two and a half years, and our company is aware that some equity investors are concerned that refinancing of that debt might have an adverse effect on our equity security holders. Our company believes that during that period, the market will better understand the value of our company, which is entirely focused on secure, highly reliable, wireless communication technology that addresses the needs of major enterprise networks, including those of state, local and federal operations. We are also mindful that the ‘sum of the parts’ enterprise value illustrated in our investor relations materials suggest that equity investors do not currently discern that value.”
TCS is seeking to rapidly expand its end-to-end public safety communication solutions business and has indentified NG9-1-1 technology as a significant growth market with state and local governments predicted to spend US$2.7bn on it over the next ten years. NG9-1-1 is a US governmental initiative to update the 9-1-1 emergency service infrastructure. microDATA develops geographical information systems (GIS) products and solutions that aid this initiative.
Under the terms of the acquisition, TCS will pay the private-held company’s owners US$20m in cash and US$14m in promissory notes and performance-based earn-out opportunities.
