RSA Security Irks Lenders With Plans for $1.38 Billion of Cash

RSA Security has riled some of its lenders over plans to use a chunk of the $1.378 billion proceeds of an asset sale to fund a tax distribution, according to people familiar with the matter.

(Bloomberg) — RSA Security has riled some of its lenders over plans to use a chunk of the $1.378 billion proceeds of an asset sale to fund a tax distribution, according to people familiar with the matter.

Cyber security firm RSA, backed by Clearlake Capital Group and Symphony Technology Group, this week asked lenders permission to use $710 million of the proceeds to pay down debt. But the company also plans to distribute $400 million to limited partners of its private equity owners, a move that has sparked pushback from debtholders, according to the people, who asked not to be identified because the matter is private.

Some $575 million is earmarked for paying down a first-lien loan and $135 million would reduce revolver borrowings, according to the people. The $400 million that would be sent to limited partners has been labeled a permitted tax distribution, they said.

Certain lenders, surprised by the $400 million distribution, have asked for documentation demonstrating how the figure came to be, they said. On a call with lenders, RSA management said it’s sending the cash to the limited partners because they are incurring tax costs from the Archer Technologies divestiture, the people said.

Messages left with the company and co-owner Symphony were not returned. A representative with Clearlake declined to comment.

A slice of RSA’s roughly $1.5 billion term loan due in 2028 is quoted at about 85 cents on the dollar, according to data compiled by Bloomberg. Its $450 million second-lien loan due in 2029 is quoted at about 63 cents.

A group of first-lien lenders organized with Gibson Dunn & Crutcher LLP ahead of the call to consider an amendment to address the use of proceeds, the people said.

Messages left with Gibson Dunn were not returned.

Clearlake and Symphony announced the sale of the risk and compliance software provider to private equity firm Cinven for an undisclosed sum on April 13.

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