Rocket Software Inc. pulled a $725 million loan deal that it was marketing to investors to refinance debt and fund a dividend, according to a person with knowledge of the transaction.
Commitments from potential lenders were due today, said the person, who asked not to be identified without authorization to speak publicly. The deal was postponed after Moody’s Investors Service last week revised the Waltham, Massachusetts-based company to “negative” because of the “large increase” in debt used for the payout to its owners.
Rocket Software had been seeking a $550 million first-loan and a $175 million second-lien piece, both of which were covenant-light, meaning they lack financial-maintenance requirements that can help protect investors. The financing would have funded a $279 million dividend to the company’s co-founders and private-equity firm Court Square Capital, Moody’s said in an April 23 statement.
“Rocket is acquisitive,” the ratings company said in the report. “Additional debt funded acquisitions could drive a downgrade.”
Rocket Software, whose B2 corporate rating by Moody’s is five levels below investment-grade, began marketing the debt on April 11, according to the person. Jefferies Group LLC was arranging the debt.
The proposed financing would have pushed the company’s leverage to 6.3 times earnings before interest, taxes, depreciation and amortization, according to Moody’s.
Attempts to reach Court Square and Andy Youniss, Rocket Software’s chief executive officer, by phone after business hours were unsuccessful.