Two weeks after a Bloomberg report surfaced that Kaseya was working with Morgan Stanley to refinance almost $4 billion in loans, the MSP-focused IT management and security software vendor has revealed the refinancing deal to potential investors.
Kaseya hosted a lender call on February 24 to discuss the transaction, according to an investor notice distributed by the company and shared with ChannelE2E. The notice said investors were being invited to participate in the refinancing through a Morgan Stanley-arranger group.
Investors are being offered a chance to participate in a $2.95 billion first-lien term loan B and a $925 million second-lien term loan, according to the investor’s notice. “Proceeds will be used to refinance the existing private credit facilities and a portion of the preferred equity,” according to the document. It was a February 14 Bloomberg story that first revealed the possibility of the refinancing machinations.
In a related matter, S&P Global Ratings has issued a “B” credit rating to Kaseya in connection with the loan refinancing offer on the first-lien term loan and a “CCC+” credit rating on the new second-lien term loan, according to a February 24 disclosure. “The stable outlook reflects our view that Kaseya will continue to grow its revenue by low- to mid-teen percent and generate more than $100 million free cash flow over the next 12-24 months,” the disclosure states.
Investors have until 5 p.m. ET on Thursday, March 6 to commit to participating in the refinancing, according to a report by PitchBook, a financial research firm that provides data and insights on capital markets.
Kaseya is owned by private equity firm Insight Partners.
The Refinancing is Part of Kaseya’s Business Strategy, Says its CFO
Ryan Courson, Kaseya’s chief financial officer and chief operating officer, told ChannelE2E that the packaging of the refinancing offer to investors is a regular course for the company.
“We are always looking for opportunities to optimize our capital structure in a way that supports our long-term growth strategy and are committed to thoughtful capital allocation, which financings fall into,” said Courson. “ When we evaluate these types of capital allocation activities, we focus on achieving flexible, efficient, and cost-effective outcomes, which supports our scale. While we can’t comment on specific details of ongoing transactions, I, along with our leadership team, remain focused on driving sustainable growth, which benefits all of Kaseya's stakeholders, including customers.”
A Sensible Business Move: Analyst
Shelly Kramer, principal analyst with Kramer&Co., told ChannelE2E that the restructuring proposal is a smart business move by the company that makes economic sense based on the numbers.
“Kaseya's 2022 acquisition of Datto, funded by $3.7 billion from lenders, is due to mature in 2029. Filings show that that loan pays an interest rate of 5.5 percentage points over the benchmark.”
By reducing that rate to 3.25 percentage points above the benchmark rate for the first $3 billion and to a four percentage point range above the benchmark for the remaining $1 million would bring huge savings for Kaseya, said Kramer.
“Personally, I think this is a math equation. When I think about the interest rate on $3 billion or even on $1 billion, even a reduction by a slight part of a percentage point will make a huge difference.”
The refinancing efforts come just a month after Kaseya announced that its longtime CEO Fred Voccola was giving up the CEO’s seat and transitioning to become the company’s board vice chairman. In an illuminating Q&A with ChannelE2E in February of 2023, Voccola spoke on a wide range of topics and initiatives he was working on inside the company.
