If you look at the security filings for open text, the big picture since Ayman came on board is that open text has refinanced its debt in a way which is costing significant money so that nothing is hanging over them until 2031. That's the tell. Not that open text refinanced everything but that they paid to do it early. The only reason I can think OT would do that is to buy a window in which nothing can force their hand. Basically open text now has 5 years with zero finance events inside it. And why would that be important??
Before this refinance, open text had a 2027 wall from the microfocus payment requirement. That would have hung over any negotiation for divestiture. Buyers are going to see that as a pressure and negotiate accordingly. I'll bet debt is why the ADM deal that JM said fell through because open text wasn't going to agree to a fire sale is because that debt was a negotiating point for the buyer. They know open text had to make this huge payment in 2027 and tried to play that. Well that's gone now. Open text has 5 years to sell off business units, products, slim down the company , get what's left attractive for a merger. That's why Ayman's here.
Now OT also has a ratings insulation. It's no secret that open text is selling business units. And when those sell it shrinks revenue EBITDA, which presses the credit rating. A long flat maturity profile is the offset rating agencies are going to credit against. open text can shrink the company without the debt story becoming the story.
Remember at the beginning of the month when some employees were getting emails letting them know they were migrated to different entities? That came out exactly at the same time the credit documents were repapered with those new entities - same sec filing date. That has got to be for alignment, making the legal chart, the employment chart and the credit chart all the same. I'm going to guess it's to support carve outs so people, assets , and contracts of the same thing being sold are on the same entity. It all moves together in the sale.
There's also an amendment to the refi in the sec filings. The payment now runs to 2031 but the extension carries a springing maturity. If more than $500 million under the acquisition term loan (the Micro Focus loan) , is still outstanding within 91 days of that loan's own maturity, the repayment date accelerates to that earlier point. Think about that. Lenders gave Ayman his 5-year runway on the contractual condition that the acquisition term loan be substantially paid down first. There's no way open text is going to sign something like that unless the plan is tethered to selling off huge chunks of the company to pay down that MF loan. It's like someone who takes out a 15 year variable rate mortgage with a low 3 year rate that triples at 3 year day one because they have a plan to pay it off before that 3-year mark.
Everything points to open text cutting itself into little pieces, carving out first what they can get the best money for to pay down that huge microfocus loan, until what remains can be absorbed into another company. OT is trying to reshape the parts that aren't on the auction block. That's why some business units and more and more core products are off the investment list.
Not sure how great a plan it is because Wells Fargo's Canadian branch declined to fund on the refi. Still though, all of the refinancing gives a credit structure that supports a much smaller de leveraged company on the other side of it. Something slim and showing growth prime to merge or sell.
Then add in the stuff that seems like white noise but really isn't. All these extra surveys this year? That OHI survey employees were strong armed by leaders to take, is designed to assess and report on the health of an organization scored against McKinsey's own global database of other companies. All the "PIPELINE is tragic and numbers must increase through the FY focus"..? OT needs information that can be fed to buyers and merger interested companies that they can put the McKinsey label on. OT may not have name trust but McKinsey does.
Ayman said he will announce plans publicly including to employees in Feb. You don't offer that unless you already know you have something to announce.