Kratos Completes $300 Million 6.50% Senior Secured Notes Offering and Establishes New $90 Million Line of Credit
November 20 2017 - 4:01PM
Kratos Defense & Security Solutions, Inc. (“Kratos”)
(Nasdaq:KTOS), announced today that it has completed the previously
announced private offering of $300 million aggregate principal
amount of 6.50% Senior Secured Notes due 2025 (the “Notes”) that is
exempt from registration under the Securities Act of 1933, as
amended (the “Securities Act”). The Notes are the senior secured
obligations of Kratos and are guaranteed on a senior secured basis
by each of Kratos’ existing and future domestic restricted
subsidiaries, subject to certain exceptions. Kratos intends to use
the net proceeds from the offering of the Notes, together with cash
on hand, to retire all of its outstanding existing 7.00% Senior
Secured Notes due 2019 (the “Existing Notes”) and to pay all fees
and expenses related thereto. Kratos expects that the issuance of
the Notes and the retirement of the Existing Notes will reduce
Kratos' annual cash paid interest expense by approximately $9.9
million through the remaining term of the previously outstanding
Existing Notes. Additionally, a feature of the Notes provides the
Company the ability to redeem, during each 12-month period
commencing on the date of issuance of the Notes and ending on or
prior to November 30, 2020, 10% of the aggregate principal amount
of the Notes at 103.000%, plus accrued and unpaid interest to, but
excluding, the redemption date, if any.
Kratos also announced today that it has replaced
its existing $110 million revolving line of credit with a new $90
million revolving line of credit. SunTrust Robinson Humphrey, Inc.
was the lead arranger for Kratos’ new revolving line of credit. The
new revolving line of credit has a maturity date of November 2022
and reduced borrowing rates of LIBOR plus 200 to 250.
Eric DeMarco, President & Chief Executive
Officer of Kratos, said, “The significant debt reduction and
refinancing of Kratos’ senior notes at a reduced cost of capital
with this transaction is another important step in positioning
Kratos for the expected continued rapid growth trajectory for our
Company. Based on currently forecast capital market dynamics,
we elected to refinance our debt with eight year notes, which
though initially at a potentially slightly higher interest rate
than other alternatives available to us, protects the Company from
potential rising interest rates in the future.”
Mr. DeMarco continued, “Kratos’
significant investment in innovative products for new growth
markets is ending over the next few quarters. As a result of
these investments, where as a result Kratos owns the intellectual
property, we have a number of new programs beginning production,
existing programs with expected increased future production
quantities and very large new opportunities before us. With
the successful completion of this refinancing, Kratos’ capital
structure, including in excess of $100 million in cash on the
balance sheet and net leverage of under 3.0 times, is now set, and
we are positioned to execute on each of these programs and our
differentiated innovation and growth strategy. Accordingly,
we expect no additional capital raising transactions for the
foreseeable future.”
As a result of the refinancing of Kratos’
Existing Notes and existing revolving line of credit, Kratos
currently expects to record one-time charges of approximately $13.0
million in its fiscal fourth quarter, comprised of the 102.625%
call premium and the write-off of the existing issuance premium and
deferred financing costs of the original financing
transactions.
The Notes and related guarantees were offered
only to persons reasonably believed to be qualified institutional
buyers in reliance on Rule 144A under the Securities Act, and
outside the United States to non-U.S. persons in reliance on
Regulation S under the Securities Act.
The Notes and related guarantees have not been
registered under the Securities Act or applicable state securities
laws and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration
requirements of the Securities Act and applicable state laws.
This press release is neither an offer to sell
nor a solicitation of an offer to buy the Notes or any other
securities and shall not constitute an offer to sell or a
solicitation of an offer to buy, or a sale of, the Notes or any
other securities in any jurisdiction in which such offer,
solicitation or sale is unlawful. This press release does not
constitute a notice of redemption under the redemption provisions
of the indenture governing the Existing Notes.
About Kratos Defense & Security
Solutions
Kratos Defense & Security Solutions, Inc.
(Nasdaq:KTOS) develops transformative, affordable technology for
the Department of Defense and commercial customers. Kratos is
changing the way breakthrough technology for these industries is
brought to market through proactive research and a streamlined
development process. Kratos specializes in unmanned systems,
satellite communications, cyber security/warfare, microwave
electronics, missile defense, training and combat systems.
Notice Regarding Forward-Looking
Statements
Certain statements in this press release may
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
statements relate to a variety of matters, including, without
limitation, Kratos' ability to achieve the interest expense savings
expected to arise from the refinancing of its Existing Notes, and
the amount of the one-time accounting charges expected to be
recorded by Kratos in connection with such refinancing. These
forward-looking statements are made on the basis of the current
beliefs, expectations and assumptions of the management of Kratos
and are subject to significant risks and uncertainty.
Investors are cautioned not to place undue reliance on any such
forward-looking statements. All such forward-looking
statements speak only as of the date they are made, and Kratos
undertakes no obligation to update or revise these statements,
whether as a result of new information, future events or
otherwise.
Factors that may cause actual results to differ
materially from the forward-looking statements contained herein
include, without limitation, risks and uncertainties related to
market conditions. There can be no assurance that Kratos will be
able to complete the proposed offering on the anticipated terms, or
at all. For a further discussion of risks and uncertainties
that could cause actual results to differ from those expressed in
these forward-looking statements, as well as risks relating to the
business of Kratos in general, see the risk disclosures in the
Annual Report on Form 10-K of Kratos for the year ended December
25, 2016, and in subsequent reports on Forms 10-Q and 8-K and other
filings made with the SEC by Kratos.
Press Contact:Yolanda
White858-812-7302 Direct Investor
Information:877-934-4687investor@kratosdefense.com
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