Summary: Attachmate receives very bad ratings and cancels its call for loans (more debt)
THE buyer of Novell had debt and could barely buy Novell. The whole sale smells like some kind of corruption and there is secrecy around it. Novell is being liquidated now, as Glyn Moody alleged. Consider the fact that Attachmate is not new to controversy; its CEO was arrested for mass-murdering animals with a firearm. Attachmate’s purchase of Novell faces a lot of opposition from Novell shareholders, but that was not enough to stop it. Attachmate debt and fragility will most likely mean the death of Novell. Microsoft gets Novell’s patents, Attachmate puts the rest in the graveyard. It’s cheaper than buying the whole lot and it also evades regulators (although CPTN did receive some scrutiny at the end).
Last month we wrote about a major downgrade of Attachmate and later on we showed some desperate moves. Attachmate has since then cancelled the call for loans (which made the company’s evaluation drop):
Credit Suisse AG was arranging the debt, which included a $300 million incremental first-lien term loan due in April 2017 and a $100 million incremental second-lien term loan due October 2017, according to data compiled by Bloomberg.
Standard & Poor’s Ratings Services said that its rating and outlook on Attachmate Corp. are not affected following the company’s announcement that it has withdrawn its proposed $609 million dividend recapitalization transaction.
This cancellation was too late because Moody’s says Attachmate’s B2 rating and negative outlook not affected by cancelled dividend transaction. The company is still going down the drain and Forbes mentions it in a related context:
Still, dividend activity remains inside the $8.7 billion monthly average of the liquidity-drenched opening half of 2011. And the fact that Attachmate recently pulled its transaction shows that investors have limits and are not willing to go along with the most aggressive dividend proposals.
The planned dividend was large. Attachmate was seeking to pay out $609 million, comprising the entire cash equity position of the owners plus an estimated $40-50 million of additional payout. Although the absolute increase in leverage was not outsized at a one-turn increase, to 3.7x, investors were wary about the business trend line. Indeed, the recent Attachmate-Novell merger represents cost-cutting play as opposed to the equity-friendly growth story pitched by Asurion. Existing lenders were in a power position, having to amend to approve the incremental debt used to fund the dividend, and second-lien investors in particular were concerned about the additional first-lien debt coming in ahead of them. And some investors felt that the corresponding leverage would be uncomfortably close to Attachmate’s total valuation in a downside scenario.
Not to end on too pessimistic a note, Attachmate still has presence in Australia and this is perhaps the only area of expansion based on what we’ve seen in the press this year and last year. Here is a new example:
Lilli’s commercial space also now houses US IT company Attachmate, which has made the building its Melbourne headquarters. The company is occupying half the building’s 2500 sq m of office space.
They are lucky to have some major contracts in Australia; there are some actual products in Attachmate, but announcements about them are rare. Press releases reveal staff that left the company and since it’s a private company it is hard to say whether Attachmate is quietly collapsing. █