Leveraged Loans: Purchase Price Multiples on European LBOs Rise

european LBO purchase price multiple

LBOs in Europe are getting more expensive for private equity sponsors.

The average purchase price, as a multiple of trailing EBITDA, reached 10x in 2016’s first quarter, more than any full-year average, according to S&P Global Market Intelligence LCD.

The multiples paid on these buyouts fall across a wide range. Many of the deals that came to market in the first quarter were bought for an unremarkable multiple, in the 8–9x area, but a good handful of transactions topped 10x — some by a fair margin. – Ruth McGavin

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Russell Investments Readies $700M Leveraged Loan Backing LBO

Barclays, Macquarie, and Credit Suisse have scheduled a lender meeting for Thursday, April 14 to launch a $700 million senior secured financing backing TA Associates and Reverence Capital Partners’ planned acquisition of Russell Investments, according to sources.

The financing comprises a $650 million, seven-year B term loan and a $50 million, five-year revolving credit.

TA Associates and Reverence Capital in October agreed to purchase the asset manager from the London Stock Exchange Group in a transaction valued at $1.15 billion. At the time the deal was announced, the firms said they expected the deal to close in the first half of 2016.

Russell Investments, which is headquartered in Seattle, had over $241 billion in assets under management as of Dec. 31, 2015, according to its website. — Kerry Kantin

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Risk-off (LBO Edition): Ultra-High Leveraged Loans Sit Out 2016’s First Quarter

highly leveraged loans

It was risk-off in the U.S. leveraged loan market during 2016’s first quarter – for LBOs with ultra-high debt, anyway – as more restrictive lending regulations and unfriendly market technicals kept a lid on aggressive buyout deals.

So far this year there have been no LBOs structured with a debt multiple of 7x or more, according to S&P Global Market Intelligence LCD.

In comparison, roughly 4% of LBOs completed in 2015 featured leverage starting at 7x or more, while 15.5% of LBOs had that debt structure in 2014. (That’s the most since the market collapse of 2008/09.) – Staff reports

This analysis – along with a host of other charts and tables – first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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LBO Market: Purchase Price Multiples, Equity Contributions Remain High

LBO stats

Leveraged buyouts continue expensive to private equity firms, as purchase price multiples increased from already lofty levels during the first three months of the year. What’s more, sponsors have been required to kick in a substantial equity percentage to get a transaction done, according to S&P Global Market Intelligence LCD.

Market players expect these trends to persist as regulatory pressures and fragile leveraged loan market technical conditions continue to discourage highly geared deals, creating an environment that is more conducive to better-rated transactions from strategic issuers (you can read about strategic vs PE/platform deals here).

This story – along with numerous other charts detailing 1Q U.S. leveraged loan activity – first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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TruGreen Launches $560M Leveraged Loan Backing Scotts Merger

Arrangers J.P. Morgan, Credit Suisse, ING, Natixis, Rabobank, and Goldman Sachs earlier today launched their first-lien financing backing the merger of Clayton Dubilier & Rice–controlled TruGreen with Scotts Miracle-Gro Co.’s Scotts LawnService business, setting price talk on the term loan of L+575, with a 1% LIBOR floor, offered at 98-98.5, sources said.

The financing includes a $560 million B term loan and a $146 million revolving credit. A $200 million second-lien term loan has been placed privately and carries a 12% coupon, sources said. The first-lien term loan includes six months of 101 soft call protection and would yield roughly 7.22–7.32% to maturity.

The RC will be governed by a springing maximum first-lien test of 5.25x that will step down to 5x for the quarter ended Dec. 31, 2016, and will become effective when revolver utilization is 30%, according to Standard & Poor’s.

According to published reports, Scotts Miracle-Gro would receive $200 million in cash as it adds the Scotts LawnService business to the joint venture, taking a 30% stake. The combined company would operate under the TruGreen name, sources said.

Commitments are due on April 8.

TruGreen was spun off from CD&R-owned ServiceMaster in early 2014, using a restricted-payments basket in ServiceMaster’s credit agreement that, in effect, allowed CD&R to take the asset as a dividend. At the time, TruGreen had been underperforming and was seen as a potential stumbling block to ServiceMaster’s planned initial public offering.

A thorough process—including a solvency opinion and capital surplus analysis—showed that a spin-off was in the company’s best interests. The company’s capital surplus was adequate to make the planned distribution, and leverage would stay at 7.6x after a spin-off, the company said at the time. An analysis for the board valued TruGreen as a dividend at $399 million, the high end of a $352–402 million valuation range of a financial advisor, and within a $484 million term loan restricted payment threshold. The restricted-payment threshold for the distribution under indentures for 7% and 8% notes is $549 million.

Now, TruGreen is valued at $815 million in the transaction as CD&R sells the company out of one of its funds and reinvests into a newer fund, according to sources. TruGreen is rated B/B2. The first-lien loan is rated B/B1, with a 3H recovery rating. —Chris Donnelly

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Leveraged Finance Fights Melanoma benefit planned for May 24

The fifth annual Leveraged Finance Fights Melanoma benefit and cocktail party is planned for May 24 at the Summer Garden and Sea Grill at Rockefeller Center. Funds raised at the event will support the Melanoma Research Alliance (MRA), the world’s largest private funder of melanoma research, which was founded in 2007 by Debra and Leon Black under the auspices of the Milken Institute.

Since this event was launched in 2012, the leveraged finance community has come together and generously supported over $5 million of cutting-edge cancer research. These funded studies have accelerated advances in immunotherapy treatments that have led to breakthroughs like anti-PD-1 agents which are being used to treat melanoma, were recently approved to treat lung cancer, and are now being tested in other tumors including bladder, blood, and kidney cancers.

The event co-hosts are Brendan Dillon from UBS; Lee Grinberg from Elliott Management; George Mueller from KKR; Jeff Rowbottom from PSP Investments; Cade Thompson from KKR; and Trevor Watt from Hellman & Friedman. Attendees include the biggest names in leveraged finance, from all of the top banks, many investment houses, several law firms, select issuers, and some private equity sponsors. As with the prior events, LCD is a proud sponsor.

Due to ongoing operational support from its founders, 100% of donations to MRA go directly to support research programs working toward a cure for melanoma, the deadliest type of skin cancer. Since MRA began its work, 11 new treatments have been approved by the FDA.

Funds raised from prior year events have supported six MRA research awards at institutions spanning the U.S. These projects focus on targeted and immunotherapy treatments, which boost the immune system to fight off cancer more effectively. The studies address critical research questions to advance the development of new therapies for melanoma patients and inform progress against cancer as a whole.

“We’re making tremendous breakthroughs in understanding and treating melanoma, including several new therapies that could be game-changers for the entire field of oncology,” said Jeff Rowbottom, LFFM co-host and MRA board member. “The Leveraged Finance Fights Melanoma events have supported important research that is enabling innovations in the way we treat cancer.”

The objectives for the 2016 LFFM event are to increase awareness, to raise funds to further advance research, and to save lives. Melanoma awareness and early detection are vital when it comes to combating the disease; if melanoma is detected early—before it has spread beyond the skin—it is almost always treatable. Past events have led to many members of the leveraged finance community seeing dermatologists for skin checks and even to the discovery and treatment of several early stage melanomas.

Tickets are $300. For further information about the event and to purchase tickets, please Those seeking information about the event and sponsorship opportunities can contact Rachel Gazzerro of MRA at (202) 336-8947 or — Staff reports


TPG sees near-record originations in 4Q, helped by Idera investment

TPG Specialty Lending, a BDC trading on the NYSE under the ticker TSLX, said originations totaled a near-record $399 million in the recent quarter.

These originations compare to a gross total of $305 million in the final quarter of 2014 and $185 million in the quarter ended Sept. 30. The most recent quarter was the second strongest quarter for originations since TPG’s inception.

Among the new additions to the portfolio in the final quarter of 2015 was a significant piece of M&A financing for Idera, a loan deal that priced wide to talk in volatile market conditions. The loan funded an acquisition of Embarcadero Technologies, which was a portfolio company of TPG.

In October, TPG added a $62.5 million piece of Idera’s loan due 2021 at a cost basis of $56.4 million and $55.9 million at fair value. The loan accounts for 6.8% of TPG’s net assets.

Asked about the loan in an earnings call today, co-CEO Josh Easterly said TPG was able to co-invest in Idera across platforms and was motivated by an intimate knowledge of the software industry and the acquisition target.

“We were able to go in with size, with a big order, to drive terms on a credit we knew that benefited TSLX shareholders,” Easterly said.

Another addition to the investment portfolio was a $45 million first-lien loan due 2021 to MatrixCare, the company’s 10-K filed yesterday after market close showed. Interest on the loan is 6.25%. Fair value and the cost of the loan was $44.1 million as of Dec. 31, the 10-K showed.

GI Partners acquired Canadian healthcare IT company Logibec from OMERS Private Equity in December. OMERS retained Logibec’s former U.S. subsidiary, MatrixCare, which provides health records to long-term care and senior-living facilities.

Also during the quarter, TPG received repayment of a loan to bankrupt grocery store chain operator Great Atlantic & Pacific Tea Co. (A&P).

Exits and repayments totaled $155 million in the most recent quarter, for a net portfolio increase of $129 million in principal. The fair value of the investment portfolio was $1.49 billion as of Dec. 31, reflecting positions in 46 companies. Some 88% of the portfolio was in the first-lien debt of U.S. middle market companies.

Oil and gas

The BDC’s exposure to the troubled oil and gas sector was 3.2%, at fair value, in two investments: Mississippi Resources and Key Energy Services. This compared to oil and gas exposure of 4% for the portfolio as of Sept. 30, which included a loan to Milagro Oil & Gas. A bankruptcy judge confirmed a reorganization plan for Milagro on Oct. 8.

The investment in upstream E&P company Mississippi Resources included a $46.7 million 13% (including 1.5% PIK) first-lien loan due 2018 and equity. The Key Energy investment is a $13.5 million first-lien loan due 2020, booked with a fair value of $10.5 million in TPG’s portfolio, the SEC filing showed.

“We will opportunistically review situations,” Easterly said of potential lending to the oil and gas sector.


TPG Specialty Lending had no investments on non-accrual status at the end of the quarter.

TICC Capital

The portfolio reflected TPG’s ongoing interest in TICC Capital. TPG owns 1.6 million TICC shares, representing 1.2% of its investment portfolio. TPG is trying to acquire TICC Capital, saying TICC’s external manager has failed the BDC and, given the chance, TPG could improve returns for shareholders.

Earlier this month, TPG nominated a board member and proposed severing what it called TICC Capital’s failed management agreement with TICC Management. TPG owns roughly 3% of TICC Capital stock. An earlier stock-for-stock offer by TPG for TICC was rejected.

The move by TPG came after a shareholder vote at TICC in December that blocked a plan to change TICC Capital’s investment advisor to Benefit Street Partners.

“We believe the result of the shareholder vote not only reflects the demand for TICC shareholders for better management and governance, but also heralds an inflection point for the broader BDC industry to build a culture of accountability and shareholder alignment,” Easterly said today.


Net asset value per share declined to $15.15 at year-end, from $15.62 as of Sept. 30, and from $15.53 a year earlier. The decline was due to unrealized losses, widening credit spreads in the broader market, and volatility in the energy sector.

Shares of TPG were trading at $16.01 at midday today, up more than 1%, but the stock drifted down to $15.89 in afternoon trade. — Abby Latour

Follow Abby on Twitter @abbynyhk for middle market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.


Private Equity Sponsors Kicking in More Equity on 2016 Buyout Deals

europe LBO equity contribution

European loan issuance for sponsored transactions bloomed to €7.9 billion in January, making it the busiest month since July 2014. Among the 20 deals that launched to syndication, there were 16 buyout financings accounting for €5.9 billion.

This chart first appeared in LCD’s European Private Equity Report, which each month offers comprehensive analysis of leveraged loan/sponsor activity. It is available to LCD subscribers here


Pricing Emerges on Dell’s Leveraged Loan Package Backing EMC Buy

Pricing has emerged on the pro rata loan component of the $49.5 billion debt financing that will be used to back Dell’s planned $67 billion acquisition of data-storage company EMC.

The pro rata loans include a $3.5 billion, three-year A-1 term loan; a $3.5 billion, five-year A-2 term loan; and a $3 billion, five-year revolver. Pricing on the three-year tranche and revolver opens at L+200, while pricing on the five-year tranche opens at L+225.

Commitments are due Feb. 10.

The debt financing would also encompass an $8 billion, seven-year B term loan; $16 billion of senior secured notes; and $9 billion of senior unsecured notes, which have been bridged. The financing also includes a $2.5 billion, 364-day senior secured term cash flow facility; a $2.5 billion margin bridge facility; and a $1.5 billion VMware note bridge facility.

Investors expect retail marketing of the institutional debt to occur during the second quarter of 2016.

The A-2 term loan would amortize at a rate of 5%, 5%, 10%, 10%, and 70%. The B term loan includes a 1% prepayment premium for six months after the closing of the merger. The A-1 and A-2 term loans and revolver will be covered by a first-lien net leverage ratio maintenance covenant. The initial commitment fee under the revolver would be 37.5 bps.

As reported, Dell obtained commitments for the $49.5 billion debt financing from Credit Suisse, J.P. Morgan, Bank of America Merrill Lynch, Barclays, Citi, Goldman Sachs, Deutsche Bank, and RBC Capital Markets.

Dell has also obtained committed equity financing for up to $4.25 billion from Michael S. Dell, MSD Partners, Silver Lake, and Tamasek to back the acquisition, which is expected to close mid-2016. Dell and related stockholders will own roughly 70% of the company’s common equity, excluding the stock, which is similar to their ownership share prior to the transaction.

Dell expects to repay substantially all of its secured debt at the closing of the transaction. All other existing unsecured notes will remain outstanding.

Dell is planning to acquire EMC Corp., while maintaining VMware as a publicly traded company. EMC shareholders will receive $24.05 per share in cash in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware business. Based on the estimated number of EMC shares outstanding at the close of the transaction, EMC shareholders are expected to receive roughly 0.111 shares of new tracking stock for each EMC share.

The combination of Dell and EMC would create the world’s largest privately controlled technology company, according to the Dell statement. Dell said that it intends to focus on delevering in the first 18–24 months following the closing of the transaction and to maintain its investment-grade debt ratings. Dell’s TLB is rated BBB/Ba1/BBB-

S&P Ratings Services in October affirmed Dell’s BB+ corporate rating and placed EMC’s A corporate rating on CreditWatch with negative implications. Moody’s placed Dell’s Ba2 corporate rating under review for an upgrade and placed EMC’s A1 senior unsecured rating under review for a downgrade. Dell is rated BB by Fitch.

Michael Dell and Silver Lake took the company private in a $25 billion transaction in late 2013. — Richard Kellerhals/Chris Donnelly

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Amid Market Turmoil, Buyout Loans Buoy Europe at Levels not Seen Since 2008

europe sponsored leveraged loan volume

Despite upheaval in the in the global economic markets and turmoil in the European leveraged loan secondary, this year’s buyout loan market is off to a swift start, with 16 deals launching to syndication in January, according to S&P Capital IQ and SNL.

By the end of the month, loan issuance to support these buyouts amounted to €5.9 billion of paper hitting the European market – the highest monthly reading since July 2008. For reference, buyout-related volume totalled just €3.2 billion from 10 transactions at this time in 2015.

All of January’s new-issue activity came from private equity backed borrowers. – Luke Millar

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This story first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here