Veritas US Term Loan

Publicly traded companies mentioned herein: The Carlyle Group LP (CG), Symantec Corporation (SYMC)

Highlights

The presenter is long Veritas’ Term Loan. The business was recently carved-out from Symantec in an LBO by Carlyle Group, where Carlyle paid approximately 9x EBITDA for the business. Veritas’ financials disappointed prior to closing due to various business realignment actions which negatively affected near-term numbers, causing Caryle to seek a price adjustment of $1 billion. This may have also created a bit of a negative overhang on the financing that was required. He said this overhang, combined with poor timing due to weak credit market conditions, left the bank syndicate holding a large commitment on their books. The loans were ultimately sold to investors in a series of transactions in the mid-to-high 80s. The Term Loan currently trades at approximately 90 today and yields ~9% to maturity. At only 3x Debt/EBITDA through this security, the presenter believes the loan is “money good” and assuming it trades to par over the next 12 months a high teens return is achievable.