Deluxe Announces Pricing of Senior Secured Notes Offering

Rhea-AI Summary

Deluxe (NYSE: DLX) has announced the pricing of $450 million senior secured notes due 2029, upsized from the initial $400 million. The notes will pay interest semi-annually at 8.125% per annum. The company plans to use the proceeds, along with new senior secured credit facilities, to refinance existing term A loan and revolving credit facilities. The new credit facilities include a $400 million revolving credit facility and $500 million term A loan facility, extending maturity to February 1, 2029. The offering is expected to close on December 3, 2024.

Positive

• Successful upsizing of notes offering from $400M to $450M indicates strong investor interest
• Extension of debt maturity to 2029 improves financial flexibility
• Secured new credit facilities totaling $900M ($400M revolving + $500M term loan)

Negative

• High interest rate of 8.125% on new notes increases debt servicing costs
• Substantial debt refinancing indicates significant leverage

Insights

Financial Analyst

This debt refinancing represents a significant financial restructuring for Deluxe, with several key implications. The $450 million senior secured notes offering at 8.125% interest, combined with new credit facilities totaling $900 million, signals a comprehensive balance sheet overhaul. The upsizing from $400 million to $450 million suggests strong investor demand.

The new credit structure provides enhanced financial flexibility through 2029, though at a relatively high interest rate reflecting current market conditions. The variable rate structure on the credit facilities, with SOFR plus 1.50% to 2.75%, allows for potential rate optimization based on leverage ratios. However, investors should note the increased interest expense impact on future earnings given the current rate environment.

MINNEAPOLIS--(BUSINESS WIRE)-- Deluxe (NYSE: DLX), a Trusted Payments and Data company (the “Company”), today announced the pricing of $450 million aggregate principal amount of its senior secured notes due 2029 (the “Notes”). The size of the offering was upsized from $400 million to $450 million. The offering is expected to close on December 3, 2024, subject to customary closing conditions. The Notes will pay interest semi-annually at a rate of 8.125% per annum. The Notes are being offered in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to persons outside the United States in accordance with Regulation S under the Securities Act.

The Company intends to use the net proceeds from the Notes offering, together with borrowings under the Company’s new senior secured credit facilities, to (i) refinance its term A loan facility (the “Existing Term A Loan Facility”) and its revolving credit facility (the “Existing Revolving Credit Facility”) and (ii) pay transaction fees and expenses. The offering of the Notes is conditioned on the closing of an amendment and restatement of the Company's existing credit agreement governing the Existing Term A Loan Facility and the Existing Revolving Credit Facility to provide for new senior secured credit facilities consisting of a revolving credit facility in an aggregate committed amount of $400 million and a term A loan facility in an aggregate principal amount of $500 million and extending maturity to February 1, 2029. Amounts outstanding under the new senior secured credit facilities are expected to bear interest at the Company’s option, at (i) adjusted SOFR (including a credit spread adjustment of 0.10%), plus 1.50% to 2.75% (depending on the Company’s consolidated total leverage ratio) or (ii) the greater of (x) the prime rate, (y) the federal funds rate plus 0.50% or (z) adjusted SOFR (including a credit spread adjustment of 0.10%) plus 1.00%, plus 0.50% to 1.75%, depending on the Company’s consolidated total leverage ratio, all subject to a 1.00% floor.

This press release does not and will not constitute an offer to sell or the solicitation of an offer to buy the Notes or any other securities, nor will there be any sale of the Notes or any other securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The Notes and related note guarantees have not been and will not be registered under the Securities Act or any state or other jurisdiction’s securities laws and may not be offered or sold in the United States to, or for the benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable securities laws of any state or other jurisdiction.

About Deluxe

Deluxe, a Trusted Payments and Data company, champions business so communities thrive. Our solutions help businesses pay, get paid, and grow. For more than 100 years, Deluxe customers have relied on our solutions and platforms at all stages of their lifecycle, from start-up to maturity. Our powerful scale supports millions of small businesses, thousands of vital financial institutions and hundreds of the world’s largest consumer brands, while processing more than $2 trillion in annual payment volume. Our reach, scale and distribution channels position Deluxe to be our customers’ most trusted business partner.

Cautionary Statement Regarding Forward-Looking Statements

Statements made in this press release concerning the Company, the Company’s or management’s intentions, expectations, outlook or predictions about future results or events are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management’s current intentions or beliefs and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which variations could be material and adverse. Factors that could produce such a variation include, but are not limited to, the following: changes in local, regional, national and international economic or political conditions, including those resulting from heightened inflation, rising interest rates, a recession, or intensified international hostilities, and the impact they may have on the Company, its data, customers, or demand for the Company’s products and services; the effect of proposed and enacted legislative and regulatory actions affecting the Company or the financial services industry as a whole; continuing cost increases and/or declines in the availability of data, materials and other services; the Company’s ability to execute its transformational strategy and to realize the intended benefits; the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond the Company’s control; declining demand for the Company’s checks, check-related products and services and business forms; risks that the Company’s strategies intended to drive sustained revenue and earnings growth, despite the continuing decline in checks and forms, are delayed or unsuccessful; intense competition; continued consolidation of financial institutions and/or bank failures, thereby reducing the number of potential customers and referral sources and increasing downward pressure on the Company’s revenue and gross profit; risks related to acquisitions, including integration-related risks and risks that future acquisitions will not be consummated; risks that any such acquisitions do not produce the anticipated results or synergies; risks that the Company’s cost reduction initiatives will be delayed or unsuccessful; risks related to any divestitures contemplated or undertaken by the Company; performance shortfalls by one or more of the Company’s major suppliers, licensors, data or service providers; continuing supply chain and labor supply issues; unanticipated delays, costs and expenses in the development and marketing of products and services, including financial technology and treasury management solutions; the failure of such products and services to deliver the expected revenues and other financial targets; risks related to security breaches, computer malware or other cyber-attacks; risks of interruptions to the Company’s website operations or information technology systems; and risks of unfavorable outcomes and the costs to defend litigation and other disputes. The Company’s forward-looking statements speak only as of the time made, and management assumes no obligation to publicly update any such statements. Additional information concerning these and other factors that could cause actual results and events to differ materially from the Company’s current expectations are contained in the Company’s Form 10-K for the year ended December 31, 2023 and in the Company’s Form 10-Q for the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241119294332/en/

Brian Anderson, VP, Strategy & Investor Relations

651-447-4197

brian.anderson@deluxe.com

Keith Negrin, VP, Communications

612-669-1459

keith.negrin@deluxe.com

Source: Deluxe Corporation

FAQ

What is the interest rate on Deluxe's (DLX) new senior secured notes?

Deluxe's new senior secured notes will pay interest semi-annually at a rate of 8.125% per annum.

How much did Deluxe (DLX) upsize its senior secured notes offering?

Deluxe upsized its senior secured notes offering from $400 million to $450 million.

When will Deluxe's (DLX) new senior secured notes mature?

The senior secured notes are due in 2029, with the new credit facilities extending maturity to February 1, 2029.

What is the total value of Deluxe's (DLX) new credit facilities?

Deluxe's new credit facilities total $900 million, consisting of a $400 million revolving credit facility and a $500 million term A loan facility.