Rackspace Technology Announces Early Tender Results of the Exchange Offer Relating to its 3.50% First-Priority Senior Secured Notes due 2028
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Insights
The tender results of Rackspace Technology's debt exchange offer reflect a substantial participation rate, with 73.1% of the existing secured notes being tendered. This high rate indicates a level of confidence from debt holders in the company's financial strategy and future prospects. The exchange offer allows the company to manage its debt profile more effectively by extending maturities or altering interest rates, which can improve liquidity and reduce financial risk. The offer's structure, including the early and late exchange considerations, incentivizes participation and could impact Rackspace's short-term cash outflows due to the cash component of the consideration.
From a market perspective, the successful execution of this offer could be perceived positively, as it demonstrates the company's proactive approach to debt management. However, investors should be mindful of the potential increase in leverage and its implications for the company's credit rating and cost of capital. The original issue discount on the new term loans suggests a competitive interest rate environment, which could be advantageous for Rackspace in terms of interest expenses.
The technology solutions sector is highly competitive, with companies continually seeking to optimize their capital structures. Rackspace's exchange offer is a strategic financial maneuver that aligns with industry practices aimed at achieving cost-effective financing. The company's decision to target qualified institutional buyers and non-U.S. persons reflects a strategic approach to engage a specific investor base, potentially diversifying its debt holder composition and tapping into international markets.
Long-term, this exchange offer could signal to the market Rackspace's commitment to maintaining a balanced sheet and could influence investor sentiment. The timing and success of such financial operations are crucial, as they can affect the company's ability to invest in growth opportunities and maintain competitive edge in the hybrid, multicloud and AI technology solutions space.
The exchange offer's reliance on exemptions from registration under the Securities Act, specifically Section 4(a)(2) and Regulation S, is indicative of Rackspace's strategic use of securities regulations to conduct complex financial transactions without the need for a public offering. This approach is common for transactions involving sophisticated parties such as qualified institutional buyers and non-U.S. persons.
It is important for stakeholders to understand the legal framework governing such offers, as they are not subject to the same level of disclosure and regulatory scrutiny as public offerings. The conditions and restrictions placed on the exchange offer, including the prohibition of partial tenders and the setting of early participation incentives, are designed to maximize participation while minimizing administrative complexity. Stakeholders should pay attention to the company's compliance with securities laws, as any deviations could result in legal challenges or regulatory penalties, impacting the company's reputation and financial stability.
SAN ANTONIO, March 28, 2024 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT) (“Rackspace” or the “Company”), a leading end-to-end hybrid, multicloud, and AI technology solutions company, today announced the early tender results of the previously announced offer by its indirect subsidiary Rackspace Finance, LLC (the “New Issuer”), to eligible holders in respect of any and all of the
As of 5:00 p.m., New York City time, on March 28, 2024 (the “Early Participation Time”), the New Issuer received from eligible holders valid and unwithdrawn tenders, as reported by Epiq Corporate Restructuring, LLC (the “Transaction Agent” or “Epiq”), the transaction agent, representing
The following table summarizes certain terms of the Exchange Offer, including the consideration eligible holders will receive in respect of the Existing Secured Notes tendered on or prior to the Early Participation Time and after the Early Participation Time. Eligible holders must validly tender (and not validly withdraw) all of such holder’s Existing Secured Notes to participate in the Exchange Offer. Partial tenders of Existing Secured Notes will not be accepted.
| CUSIP Numbers(1) | Early Exchange Consideration for each | Late Exchange Consideration for each | ||||||
| With respect to | With respect to | With respect to | With respect to | |||||
| 750098 AB1 U7502E AB0 | ||||||||
| ___________________________________ | ||||||||
| (1) No representation is made as to the correctness or accuracy of the CUSIP numbers listed in this release or printed on the Existing Secured Notes. CUSIP numbers are provided solely for convenience. | ||||||||
| (2) Holders of Existing Secured Notes that are accepted for exchange pursuant to the Exchange Offer will be entitled to receive accrued and unpaid interest in cash on the Existing Secured Notes exchanged for Exchange Notes up to, but excluding, March 12, 2024. Interest on the Exchange Notes will accrue from March 12, 2024, with the first interest payment occurring on August 15, 2024. | ||||||||
| (3) No additional payment will be made for accrued and unpaid interest on Existing Secured Notes purchased and cancelled for the Early Payment Amount or the Late Payment Amount (together with the Early Payment Amount, the “Payment Amounts”), as applicable. | ||||||||
As of 5:00 p.m., New York City time, on March 28, 2024, the right to withdraw tenders of Existing Secured Notes expired. Accordingly, Existing Secured Notes tendered for exchange may not be validly withdrawn, unless required by applicable law, or the New Issuer determines in the future and in its sole discretion to permit withdrawal rights.
Eligible holders who tender (and do not validly withdraw) all of their Existing Secured Notes after the Early Participation Time but at or prior to the Expiration Time, and their Existing Secured Notes are accepted, will receive the Late Exchange Consideration described above.
Eligible holders that validly tendered (and did not validly withdraw) all of such holder’s Existing Secured Notes in the Exchange Offer at or prior to the Early Participation Time (“Participating Eligible Holders”) had the right to purchase New FLFO Term Loans in an aggregate principal amount equal to
The Exchange Offer will expire at 5:00 p.m., New York City time, on April 11, 2024, unless extended (the “Expiration Time”). For Existing Secured Notes that have been validly tendered after the Early Participation Time but at or prior to the Expiration Time and not subsequently validly withdrawn and that are accepted in the Exchange Offer, the settlement date is expected to occur promptly after the Expiration Time (the “Final Settlement Date”). The Final Settlement Date is expected to occur on April 15, 2024 (the second business day after the Expiration Time). The Early Settlement Date or Final Settlement Date may change without notice.
Consummation of the Exchange Offer is conditioned upon the satisfaction or waiver of the conditions set forth in the Offering Memorandum.
The Exchange Offer is only being made, and the Exchange Notes are only being offered and issued to holders of Existing Secured Notes who are (x) reasonably believed to be “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) or (y) not “U.S. persons” as defined in Rule 902 under the Securities Act and in compliance with Regulation S under the Securities Act. The holders of Existing Secured Notes who are eligible to participate in the Exchange Offer pursuant to at least one of the foregoing conditions are referred to as “eligible holders.”
The New Issuer is making the Offers only to eligible holders through, and pursuant to, the terms of the Offering Memorandum. The complete terms and conditions of the Offers are set forth in the Offering Memorandum. None of Rackspace, the New Issuer, the Guarantors (as defined in the Offering Memorandum), the Transaction Agent, the Fronting Lender, or any other person takes any position or makes any recommendation as to whether or not eligible holders should participate in the Offers.
Only eligible holders may receive a copy of the Offering Memorandum and participate in the Offers. We have retained Epiq to act as transaction agent for the Offers and Jefferies Capital Services, LLC to act as the fronting lender for the Funding Offer (the “Fronting Lender”). Holders of Existing Secured Notes wishing to certify that they are eligible holders in order to be eligible to receive a copy of the Offering Memorandum should complete the eligibility letter and return it to Epiq as directed therein. Holders of Existing Secured Notes may complete the eligibility letter on-line at https://epiqworkflow.com/cases/RackspaceEL or obtain a PDF copy of the eligibility letter by requesting a copy from tabulation@epiqglobal.com and referencing “Rackspace” in the subject line. The eligibility letter can be returned via the online portal or by emailing a scan of both pages of the fully completed letter to Epiq at Tabulation@epiqglobal.com and referencing “Rackspace” in the subject line. Once your response has been reviewed and cleared by Epiq, you will receive the Offering Memorandum from Epiq by email.
This press release is for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security and does not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Exchange Offer is being made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, has not been registered with the U.S. Securities and Exchange Commission (the “SEC”) and relies on exemptions under state securities laws.
About Rackspace Technology
Rackspace Technology is a leading end-to-end hybrid, multicloud, and AI solutions company. We design, build, and operate our customers’ cloud environments across all major technology platforms, irrespective of technology stack or deployment model. We partner with our customers at every stage of their cloud journey, enabling them to modernize applications, build new products, and adopt innovative technologies.
Forward-Looking Statements
The Company has made statements in this press release that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this press release are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements include statements related to the Offers and the Company’s ability to consummate the Offers within the time period expected, or at all. Any forward-looking statement made in this press release speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. The Company cautions that these statements are subject to risks and uncertainties, many of which are outside of its control, and could cause future events or results to be materially different from those stated or implied in this press release, including among others, risk factors that are described in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein.
Media Contact
Natalie Silva
publicrelations@rackspace.com
Investor Relations Contact
Sagar Hebbar
ir@rackspace.com
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