SEC Comment Letter for DynCorp International LLC (CIK 0001333142) — Nov 4, 2005
DynCorp International LLC (CIK 0001333142)
Date: Nov. 4, 2005 · CIK: 0001333142 · Accession: 0000000000-05-056270
AI Filing Summary & Sentiment
File numbers found in text: 333-127343
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Mail Stop 4561
September 8, 2005
Michael J. Thorne
Chief Financial Officer
DynCorp International LLC
8445 Freeport Parkway, Suite 400
Irving, Texas 75063
Re: DynCorp International LLC
Registration Statement on Form S-4
Filed August 9, 2005
File No. 333-127343
Dear Mr. Thorne:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note that DynCorp International and DIV Capital Corporation
submitted a supplemental letter stating that the companies are
registering the exchange offer in reliance on the staff`s position
in
Exxon Capital Holdings Corporation (avail. April 13, 1989) and
containing the representations required by Morgan Stanley & Co.
(avail. June 5, 1991). We further note that letter states in the
second paragraph that a broker-dealer may be a statutory
underwriter
and "must acknowledge that it will deliver" a prospectus. Please
revise to state that a broker-deal must deliver a prospectus in
accordance with the representations outlined in Shearman &
Sterling
(avail. July 2, 1993).
2. Please confirm that the offer will be open for at least 20 full
business days to ensure compliance with Rule 14e-1(a). Further,
please confirm that the expiration date will be included in the
final
prospectus disseminated to security holders and filed pursuant to
the
applicable provisions of Rule 424. We note the disclosure on the
cover and page 5 that refers to 20 business days and the
disclosure
on page 52 that indicates that the expiration date will be 30
business days after the commencement of the exchange offer.
Please
advise or revise.
3. Please supplementally provide us with copies of any graphics,
maps, photographs, and related captions or other artwork including
logos that you intend to use in the prospectus. Such graphics and
pictorial representations should not be included in any
preliminary
prospectus distributed to prospective investors prior to our
review.
4. We note your use of defined terms such as, but not limited to,
FTS, CFT, ITS, CIVPOL and INL. The meanings of terms should be
clear
from the context. Please revise to eliminate the reliance on
define
terms and use terms whose meanings are clear from the context
instead.
Cover
5. The cover page should contain only information required by Item
501 or that is information that is key to an investment decision.
In
this connection please delete the first bullet point relating to
the
company. See our Plain English Handbook available at www.sec.gov.
6. Please revise the fourth bullet point under "The New Notes" to
quantify the amount of indebtedness that will rank senior to or
pari
passu with the exchange notes.
7. Please revise to disclose that each broker-dealer that receives
new securities pursuant to an exchange offer must acknowledge that
it
will deliver a prospectus in connection with any resale of such
new
securities. In addition, please revise to disclose that if the
broker-dealer acquired the old securities as a result of market
making or other trading activities, such broker-dealer may use the
prospectus for the exchange offer, as supplemented or amended, in
connection with resales of the new securities.
8. Please revise to disclose that broker-dealers who acquired the
old
securities directly from the issuer in the initial offering must,
in
the absence of an exemption, comply with the registration and
prospectus delivery requirements of the Securities Act in
connection
with the secondary resales and cannot rely on the position of the
staff enunciated in the Exxon Capital no-action letter.
Estimated Contract Value, page 1
9. We note your statement on page 1 that that you cannot guarantee
the accuracy or completeness of this information. Please be aware
that the issuer is subject to liability for information found in
the
registration statement, regardless of whether it verified the
third-
party data.
Forward-Looking Statements, page 2
10. We note that many of the bullet points on page 2 are largely
repetitive of the risk factors included in the prospectus and are
not
directly related to forward-looking statements made in the S-4.
Please revise accordingly.
Prospectus Summary, page 3
11. Please revise your disclosure in the forepart of the
registration
statement to reduce your reliance on cross-references to other
locations in the registration statement. This comment applies
specifically to the summary and risk factors sections.
12. We note your statement that you are a "leading" provider of
government technical services and outsourced solutions. Please
provide support for this statement and briefly describe in this
section and the Business section what you mean by government
technical services and outsourced solutions. In addition, please
clearly mark any supplemental materials to indicate those portions
that support your statement. Finally, include the measurement you
are using in connection with your leadership status.
13. We note your statement that since 1951 DynCorp and its
predecessors have provided critical services to the U.S.
government.
Please revise your disclosure on this page and throughout the
prospectus to clarify, if true, that you were a subsidiary of the
former DynCorp, your current business represents only a portion of
your former parent`s business and you have only limited experience
operating as a stand-alone company. Please include the date on
which
you began operating as a stand-alone company.
14. We refer to your statements that the CFT and CIVPOL programs
are
the "most significant" programs in your operating divisions.
Please
clarify in what way they are the most significant. For example,
do
they contribute the largest portion of revenues in each of the
divisions? In connection with this, please also quantify the
portion
of revenues each contributes.
15. We note that, for fiscal 2005, you generated revenues of $1.92
billion. Please expand your disclosure to provide a more complete
snapshot of the company`s financial position, and how this
position
compares to prior periods. We note that the revenues figure is
repeated on page 11 of the Summary.
16. We note your description of the transactions on page 4.
Please
expand your disclosure to provide additional information regarding
your acquisition by Veritas Capital from Computer Sciences
Corporation, including a discussion of the purchase price, your
preferred shares and your current organization chart. Please
include
your current ownership structure, including your ultimate parent
and
its ownership structure, and identify each of your guarantor
subsidiaries and other subsidiaries. Further, please briefly
describe any transition services agreements that enable you to
operate as a stand-alone company and any management agreements
with
Veritas Capital, including all fees associated with these
agreements.
17. We note your disclosure on page 16 that substantially all of
the
voting power of your equity is held by a subsidiary of Veritas
Capital. Please quantify "substantially all," identify the
subsidiary of Veritas Capital and provide this information in the
summary.
18. Please include a brief description of your debt, including
your
aggregate indebtedness as of a recent date.
19. Please provide your website address if available.
Competitive Strengths, page 3
20. Please revise the first bullet point to describe how your
revenue
base is "diverse" in light of the fact that you derive
substantially
all of your revenues from the DoD and the DoS.
Business Strategy, page 4
21. Please expand your disclosure regarding the risks that you
face
to quantify your significant financial leverage, discuss your
limited
experience operating as a stand-alone company and disclose your
lack
of diverse customer base. In addition, please provide a brief
summary of the most significant risks associated with an
investment
in the notes.
Summary Terms of New Notes, page 7
22. Please briefly define certain terms that may not be familiar
to
investors. For example, on page 8 you refer to the "make-whole
premium," "special interest" and "disqualified stock." Please
provide brief definitions of these terms as they apply to your
disclosure in the summary section.
23. We note that the New Notes will be subordinated to your
existing
and future senior debt and will be structurally subordinated to
all
obligations of DynCorp International`s foreign subsidiaries.
Please
expand your disclosure in this section and the Description of the
New
Notes section to quantify your existing senior debt and the
obligations of your foreign subsidiaries.
Risk Factors, page 13
24. Please avoid using phrases such as "material adverse effect on
our business," "adversely affect our financial condition" or
"adversely impact our business" when describing the risks`
effects.
Replace this, and similar language, with specific disclosure of
how
you, your business, financial condition and results of operation
would be affected.
25. Please revise your risk factor subheadings so that each one
conveys the specific risk to you. Currently, some of your
subheadings merely state a general risk or a fact about your
business. We note the following examples:
* "Our controlling equity holders may take actions that conflict
with
your interests," page 16
* "An active trading market may not develop for the New Notes,"
page
17
* "We may never receive any revenues under our Indefinite
Delivery,
Indefinite Quantity Contracts," page 19
* "Our reputation and financial results could be harmed in the
event
of accidents or incidents," page 21
* "We may incur substantial costs relating to certain legal
proceedings," page 21
Please revise throughout to identify briefly in your captions the
specific risks to you that result from the facts or uncertainties.
Potential investors should be able to understand what the risk is
and
the result of the risk as it specifically applies to you.
Risks Related to Our Indebtedness, page 13
Servicing our indebtedness requires a significant..., page 13
26. We note that servicing your indebtedness requires a
significant
amount of cash. Please expand your disclosure to provide an
estimate
of the "significant amount of cash" required to service this
indebtedness.
Our debt instruments, including the indenture..., page 14
27. We note that the indenture and your senior secured credit
facility impose significant operating and financial restrictions
on
you. Please expand your disclosure to briefly describe how these
restrictions limit your ability to do the things listed in the
bullet
points.
28. We note that your senior secured credit facility requires you
to
meet specified financial ratios and tests. Please expand your
disclosure to briefly describe these financial ratios and tests.
29. We note that your parent`s preferred stock does not allow you
or
your parent to incur or become subject to any indebtedness if such
indebtedness would be in excess of total indebtedness permitted to
be
incurred under a maximum debt incurrence test. Please expand your
disclosure to briefly describe this maximum debt incurrence test.
Risks Relating to the New Notes, page 15
Your right to receive payments on the New Notes..., page 15
30. We note that all payments on the New Notes and the subsidiary
guarantees will be prohibited in the event of a payment default on
your senior indebtedness and, for limited periods, upon the
occurrence of other defaults under your senior indebtedness.
Please
expand your disclosure to briefly describe the "other" defaults
and
quantify "limited" periods.
31. Please provide additional disclosure regarding the
significance
of the subsidiaries that would be prohibited from paying dividends
to
you upon the occurrence of certain events of default under the
senior
secured credit facility. For example, what portion of your cash
flow
is comprised of these subsidiaries?
We may not have the ability to raise the funds..., page 15
32. We note that upon the occurrence of a change in control you
must
offer to buy back the New Notes at a price equal to 101% of the
principal amount, together with any accrued and unpaid interest
and
special interest. Please expand your disclosure to briefly define
"change in control" and "special interest."
Our controlling equity holders may take actions..., page 16
33. We note that substantially all of the voting power of your
equity
is held by a subsidiary of Veritas Capital. Please expand your
disclosure to quantify "substantially all" and identify the
subsidiary.
Risks Relating to Our Business, page 17
Political destabilization or insurgency in the regions..., page 19
34. Please clarify whether you have had to increase your
compensation
expenses in order to deploy them to Iraq and Afghanistan. In
addition, to the extent that you have had to increase these
expenses,
please describe whether your contracts with DoD or DoS provide a
mechanism whereby you can pass these additional costs to DoD or
DoS.
Similarly, please disclose whether you have been unable to obtain
insurance coverage to cover your liabilities.
Our costs of performing under time-and-materials..., page 20
35. We note that some of your contracts have incentive based or
other
pricing terms that condition some or all of your fees on your
ability
to meet specified performance metrics. Please expand your
disclosure
to quantify the percentage of your contracts that contain such
incentive based pricing terms.
Our business could be adversely affected..., page 20
36. We note that many of your contracts are under review by the
DCAA
and other government agencies. Please advise us as to whether you
have historically had any negative audits or any determination by
the
DCAA or other agencies that costs were improperly allocated. If
so,
please provide a brief description of this.
We may incur substantial costs relating to certain legal
proceedings,
page 21
37. Certain of your disclosure under this heading relating to the
claim brought by Al-Katin appears to mitigate the risk you are
presenting and imply that the claim is without merit. The latter
is
a legal judgment that the company is not qualified to make. If it
is
based upon advice from litigation counsel, please identify counsel
and include a consent. Otherwise, please revise to remove the
specific disclosure regarding "evidence of payment." This comment
also applies to your disclosure under the heading, "Legal
Proceedings" on page 69.
We depend upon CSC for certain transitional services..., page 22
38. We note that certain items in the transitional services
agreement
with CSC may have terminated on August 11, 2005. Please update
your
disclosure to indicate whether these provisions are still in place
or
whether you now provide these services.
Loss of our skilled personnel..., page 23
39. Please expand your disclosure to identify the members of your
senior management team upon whom you are reliant.
The 2005 Acquisition, page 24
40. We note that the amount of preferred stock issued to CSC is
subject to adjustment