Reuters, September 23, 2013 article

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Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.

Source: Reuters, September 23, 2013 article

Dell updates terms on increased $7.2 billion LBO loan

By Natalie Wright
NEW YORK | Mon Sep 23, 2013 4:30pm EDT

(Reuters)(Reuters) - Computer maker Dell Inc updated facility sizes on its new approximately $7.2 billion loan that will back the company's $25 billion buyout by founder and CEO Michael Dell and private equity firm Silver Lake Partners, sources told Thomson Reuters LPC.

Tranching now includes a $1.5-1.55 billion, five-year term loan C, a $4.625-4.675 billion, 6.5-year term loan B, and a 650-700 million euro (roughly $877-945 million), euro-denominated term loan B. The term loans are expected to be covenant-lite.

The TLC is now guided at LIB+275, with a 1 percent Libor floor, and a 99.5 original issue discount (OID). Previously, the TLC was guided at LIB+275-300.

Price talk on the U.S. dollar TLB is now LIB+350, with a 1 percent Libor floor and a 99 OID. Previously, the U.S. dollar TLB was guided at LIB+375.

The euro TLB is now guided at EUR+375, with a 1 percent floor and a 99 OID. Previously the euro TLB was guided at EUR+400.

The Libor floors and OIDs are unchanged. The TLC will include 101 soft call protection for six months. The U.S. dollar/euro TLB will include 101 soft call protection for one year, versus six months previously.

Dell's leveraged buyout (LBO) loan, the second-largest institutional LBO loan this year behind Heinz's HNZUK.UL $9.5 billion institutional issuance backing its buyout by Berkshire Hathaway and 3G Capital, has been a major focus of leveraged investors since its launch September 11. The books were reportedly strong for both the bonds and loans during syndication.

"While the company definitely faces some headwinds, I think Dell will be able to generate a large amount of free cash flow to repay its debt," said one portfolio manager.

"It will get done," said one trader last week, adding that recent announcements from the Fed that it will hold off on tapering its asset purchases ease the macro backdrop as potential lenders look closely at the company.

Initially, Dell planned a $1.5 billion, five-year term loan C and a $4 billion, 6.5-year term loan B, all dollar-denominated. These loans were expected to run alongside a $2 billion, five-year asset-based revolving credit facility (about $750 million expected to be drawn at close), $2 billion in first-lien, seven-year secured notes and $1.25 billion in second-lien eight-year secured notes.

The $2 billion first-lien note issuance has been reduced to $1.5 billion, and the $1.25 billion second-lien note issuance has been eliminated, as Dell has shifted funding to less expensive first-lien loans.

An additional $150 million in cash from the balance sheet will now be used for the transaction, sources added.

Additionally, the MFN sunset provision on the loan's incremental facility has been removed.

Recommitments from U.S. lenders are due at 5:30 p.m. EST today, while recommitments from European lenders are due at 12 p.m. GMT September 24.

The TLC will amortize at 10 percent, 17.5 percent, 22.5 percent, 25 percent and 25 percent. The U.S. dollar/euro TLB will amortize at the standard 1 percent.

Bank of America Merrill Lynch, RBC, Barclays, Credit Suisse, and UBS are lead arrangers on the term loans and the ABL revolver.

Corporate family ratings are Ba3/BB-/BB-, and first-lien facility ratings are Ba2/BB+/BB+.

In addition to the new debt, equity from Michael Dell and certain related parties and new cash equity from Silver Lake, Michael Dell, and MSD Capital will finance the transaction.

MSD Capital is an investment firm created to manage the capital of Michael Dell and his family.

The financing package also will include an up to $2 billion 7.25 percent 10-year subordinated note issuance from Microsoft, and roughly $7.8 billion in existing cash on Dell's balance sheet. The Microsoft note could be reduced by up to $500 million at closing, and up to 3.50 percent of annual interest may be paid as PIK (payable-in-kind), sources note.

(Editing By Jon Methven)

This project was conducted as part of the Shareholder Forum's public interest program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants. It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

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