Business Context and Reporting Period
This Form 8-K, dated January 2, 2014, reports the completion of a material acquisition and related corporate restructuring by Fidelity National Financial, Inc. (FNF). The filing details the consummation of the merger with Lender Processing Services, Inc. (LPS) and the subsequent formation of a new subsidiary, Black Knight Financial Services, Inc.
Key Financial Metrics and Transaction Details
- Acquisition Consideration: FNF paid approximately $2.5 billion in cash and issued approximately 25.9 million shares of FNF Class A common stock to former LPS stockholders.
- Per-Share Consideration: LPS shareholders received $28.102 in cash and 0.28742 shares of FNF common stock for each share of LPS common stock.
- Debt Obligations: As of January 2, 2014, $600 million in aggregate principal amount of LPS's 5.75% Senior Notes due 2023 remained outstanding.
- Guarantees: FNF entered into a Supplemental Indenture to fully and unconditionally guarantee the LPS Senior Notes on a joint and several basis.
- Equity Divestiture: Following the merger, FNF sold a 35% interest in the newly formed Black Knight Financial Services, Inc. to funds affiliated with Thomas H. Lee Partners, L.P.
Material Changes Versus Prior Period
The primary material change is the consolidation of LPS into FNF, resulting in LPS ceasing to be a publicly traded entity and its stock being delisted from the NYSE. FNF has assumed the obligations of LPS, including the $600 million senior notes, and has reorganized its operations to house the former LPS units and FNF's ServiceLink business under the new Black Knight subsidiary.
Guidance, Outlook, and Risks
- Debt Covenants: The Indenture for the Senior Notes contains covenants limiting additional indebtedness, restricted payments, and asset sales. However, these covenants are currently suspended because the Notes hold an Investment Grade Rating. Notably, these covenants do not apply to FNF itself, only to the Issuers (LPS and Black Knight Lending Solutions).
- Redemption Terms: The Issuers may redeem up to 35% of the Notes prior to October 15, 2015, using equity offering proceeds at 105.75% of principal. A "make-whole" premium applies for redemptions prior to October 15, 2017.
- Events of Default: The Indenture includes standard events of default, including cross-defaults for debt of $80 million or more. Bankruptcy defaults result in immediate acceleration of the Notes.
- Financial Statements: Pro forma financial information and audited financial statements for the acquired business are not included in this filing and will be submitted by amendment within 71 calendar days.
Investor Verification Checklist
- Verify the final pro forma financial impact of the LPS acquisition once filed within the 71-day window.
- Confirm the current credit rating of the $600 million Senior Notes to ensure covenant suspension status remains active.
- Review the specific terms of the 35% equity sale to Thomas H. Lee Partners to understand the remaining ownership structure of Black Knight.
- Monitor the integration of LPS and ServiceLink under the Black Knight subsidiary for operational synergies.