NEW YORK (The Deal) After his long-fought battle with Carl Icahn, one might think Michael Dell would rest on his laurels and keep Dell (DELL) the private, nimble startup he is promising the world. However, buried in the financing details for the nearly $25 billion leveraged buyout, backed by Silver Lake, is a hint that options are being kept open for a return trip to the public markets.
The roadshow for Dell's $3.25 billion bond offering backing its buyout is kicking off this week. The offering includes $2 billion of first-lien seven-year senior notes and $1.25 billion of second-lien eight-year senior notes.
Both tranches have three years of call protection, but the second-lien notes have a clawback that would allow 50% of the notes to be called at par plus half the coupon in case of an initial public offering.
"It's a little unusual because they've just gone private," said Richard Farley, a leveraged finance partner at Paul Hastings LLC.
What the clawback does for Dell is that it will allow it to pay off some of the more expensive second-lien debt if it should decide to go public during the second year following the financing, something that would be appealing to investors reading the company's S-1 filing.
And 50% is high for this type of provision. Most equity clawbacks are set between 30% and 40%, another indication that Michael Dell and Silver Lake are considering the capital structure of the company from all strategic angles.
Argus Research Co. analyst Jim Kelleher said taking Dell private to sort out its financial situation was a good strategy but, at a minimum, this company would need three to five years to even think about going public again. That said, Kelleher did not remember seeing an IPO clawback in other buyout situations recently.