Category Archives: Private Equity

content
at 8:15am

LBO deal volume on pace to top 2012 though activity remains slack

LBO deal volume

LBO deal volume for the year through May has totaled $62 billion, for a pace that would top the $92 billion seen for all of last year, according to S&P Capital IQ/LCD. While an improvement, obviously it’s light years from the pre-Lehman levels of 2006 and 2007, when LBO deal volume topped $400 billion (a record, to be sure).

This year’s $62 billion in LBO transaction volume has translated into $32 billion of leveraged loan volume. That’s an increase from past years as well, though a far cry from the record $178 billion in 2007.

This chart captures LBO transaction activity of non-middle market companies (those with EBITDA of at least $50 million).

content
at 2:12pm

LBO loan volume through May hits $32B

Leveraged loans backing LBOs have been more scarce than investment bankers and institutional investors would like of late – these deals, of course, entail high fees and interest rates – but there has been $31.6 billion of LBO loans through May  2013, putting this year on pace to easily top the roughly $47  billion seen in each of the previous two calendar years. If activity continues at the current pace, in fact, LBO loan volume will total roughly $75 billion this year, the most since 2007.

That pace might be difficult to continue, however. There was a scant $2.5 billion of LBO loan volume in May, behind only a handful of deals. Of note during the month: an $850 million loan package backing Rhone Capital’s $1.4 billion buyout of CSM Bakery. This deal featured a large covenant-lite component, illustrating the U.S. credit market’s decidedly issuer-friendly bent this year.

The numbers and chart above reflect activity in the U.S. market from issuers with EBITDA of at least $50 million.

content
at 4:36pm

Flagstone Foods wraps $222M dividend recap loan

Golub Capital and M&T Bank have wrapped syndication of a $222 million dividend recap loan for Flagstone Foods, a St. Paul, Minn.-based snack-foods company backed by Gryphon Investors, according to sources.

Sources say this is the first dividend Gryphon has extracted from the business since forming Flagstone Foods in 2010 from the merger of portfolio companies Ann’s House of Nuts and Amport Foods.

Golub led a $132 million, five-year bifurcated term loan, while M&T Bank led a $90 million, asset-based revolver, $40 million of which was funded at closing, according to sources.

The RC is priced at L+175, with no LIBOR floor, sources say. The term loan cleared at L+575, with a 1.25% LIBOR floor at 99, for a 7.45% yield.

Pro forma leverage is 3.5x through the term loan, and 4.6x through $60 million of mezzanine debt. – Kelly Thompson

content
at 9:09am

Asurion sets $850M term loan to refinance cov-lite deal

Morgan Stanley and Credit Suisse are launching an $850 million term loan for Asurion with a call at 11:00 a.m. EDT tomorrow, sources said.

Proceeds will refinance Asurion’s amortizing, covenant-lite first-lien term loan due 2017 and fund general corporate purposes, which may include – but are not limited to – refinancing the existing holdco loan, funding return of capital to shareholders and potential acquisitions, and paying related fees and expenses, sources said.

Asurion in February tapped the market for a $3.9 billion covenant-lite term loan due May 2019, which priced at L+325 with a 1.25% LIBOR floor, and includes one year of 101 soft-call protection.

Bank of America Merrill Lynch, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, and Morgan Stanley arranged the loan, which cleared at the wide end of 99.5-99.75 guidance.

The $1 billion, 7.5-year unsecured holdco term loan is priced at L+950, with a 1.5% LIBOR floor. The loan, which was placed in February 2012, is non-callable for two years. The deal has a contingent cash-pay structure.

Asurion is rated B+/Ba3, while the first-lien loan is rated B+/Ba2. Standard & Poor’s has assigned a 3 recovery rating.

Asurion, which provides protection services for the wireless industry, is controlled by Madison Dearborn, Providence Equity Partners, and Welsh, Carson, Anderson & Stowe. – Chris Donnelly

content
at 9:30am

Wasserstein launches fund to invest in leveraged loans, HY bonds

Wasserstein & Co. last month launched its first credit-oriented hedge fund as part of its effort to build out a broad asset-management platform, according to sources.

The fund, Wasserstein Debt Opportunities, will invest primarily in leveraged loans and high-yield bonds issued by companies with annual EBITDA of up to $300 million. The fund is seeking to create differentiated high-yield exposure by focusing on non-large-cap credits with less transparency and pricing efficiency, sources added.

In the current environment, the fund is investing in a mix of loans and senior secured bonds. Though both its investment mix and hedging strategy, the fund seeks to position itself to profit from market volatility, according to sources.

Wasserstein Debt Opportunities is led by Rajay Bagaria, who joined Wasserstein in October 2012 to build out the firm’s capital-markets effort. Prior to joining Wasserstein, Bagaria was a partner at Apollo Investment Management, where he focused on investments in high-yield bonds, leveraged loans, mezzanine debt, and equity.

New York-based Wasserstein currently has more than 25 investment professionals across its private-equity and asset-management businesses. – Kerry Kantin

content
at 8:22am

Omers Private equity lines up financing for Civica buyout

Omers Private Equity has agreed to buy Civica, the British provider of computer software to the public sector, from 3i for £390 million. The agreement comes after a keenly fought auction that saw the Canadian buyer win out against final rival bids from Cinven and Vista.

To support the bid Omers has mandated Bank of Ireland, Credit Agricole CIB, GE Capital, and ING to arrange an all senior loan financing, market sources said. Nomura, Weil and Wyvern Partners advised Omers.

During the auction sources put leverage talk for the financing in a 4.5-5x EBITDA context.

Omers said it would now look to support the management team through organic growth and selective acquisitions. Management, led by CEO Simon Downing, will reinvest and continue to lead the business.

3i took Civica private back in 2008, in a £190 million deal backed by a £170 million senior-and-mezzanine loan. A club of banks provided the senior debt, comprising Lloyds, Bank of Ireland, NAB, and RBS. European Capital and Lloyds provided the mezzanine portion.

Civica provides specialist systems and business process services for organisations across the public sector and around the world. The firm supplies more than 2,500 organisations in the U.K., Australia, New Zealand, Singapore, Canada, and the U.S. – David Cox/Sarah Husband

content
at 3:08pm

With LBOs scarce, private equity firms turn to dividend/recap deals

It’s no secret that dividend recaps are again a major theme in leveraged finance this year. Private equity firms, as usual, are the main source of dividend deals. PE-backed issuers have tapped the leveraged loan and high-yield bond markets for $19.7 billion of dividend financing in 2013 (as of April 26), including $16.9 billion of loans and $2.8 billion of bonds.

That figure is just below the $19.8 billion total recorded during the same period last year ($16 billion/$3.8 billion). For all of 2012 there were more than $60 billion of PE-backed dividend deals, a hefty amount.

Recaps have, in part, filled the hole created by a combination of lackluster LBO activity and the erratic, thin IPO market. With M&A-driven new-money deals far lagging demand for new paper from both loan and high-yield accounts, there’s excess liquidity available to finance dividends.

This analysis is part of an LCD News story, available to subscribers, that also details

  • Average yield for single-B loan issuers
  • Private equity-backed IPO issuance
  • New-issue clearing yield: LBO vs. dividend
  • LBO/Dividend deals in profile: SunGard, West Corp., Noranda
content
at 9:19am

Ancestry.com preps refinancing of leveraged loan backing 2012 LBO

ancestry.com logoMorgan Stanley has scheduled a lender call for 10:00 a.m. EDT tomorrow, May 3, to launch a repricing and refinancing Ancestry.com’s 2012-vintage LBO loan, according to sources.

The issuer is seeking to carve out a $200 million, five-year amortizing B-2 term loan from the $670 million B covenant-lite term loan maturing in December 2018, while also seeking to reprice the balance of the loan outstanding following a $30 million paydown using cash from the balance sheet, sources said.

Barclays, Morgan Stanley, Credit Suisse, Deutsche Bank, and RBC Capital Markets syndicated the TLB in December to back the leveraged buyout of the company by a Permira-led investor group. The existing loan is priced at L+575, with a 1.25% LIBOR floor, and is covered by a 101 soft-call premium in the first year. It was issued at 96.

Barclays will remain as administrative agent.

The issuer, a provider of online family history research, is rated B/B2, while the term loan is rated B+/B1, with a 2 recovery rating from Standard & Poor’s. – Kerry Kantin

content
at 7:36am

Investco sells Armacell to Charterhouse for more than €500M

Investcorp has agreed to sell Armacell to Charterhouse for more than €500 million, the private equity company confirmed in a statement this morning.

The agreement revives a deal that had looked in jeopardy just a few weeks ago, when sources suggested sponsor Investcorp was looking at a recapitalisation of the firm. The sponsor put Armacell on the block earlier this year and received bids by early March from a mix of private equity and trade buyers, including HgCapital and Pamplona as well as Charterhouse.

The focus will now turn to the debt mandate, which was competitively bid during the auction. Armacell is seen as a steady performer, having delevered from roughly 5.7x at the time of its 2007 buyout to around 3x at the time of the auction.

Investcorp bought Armacell from Gilde and CVC for €400 million, in a deal supported by a €382.5 million senior, second-lien, and mezzanine debt financing. BNP Paribas and CIBC arranged the facilities, which closed oversubscribed allowing for a pricing and structural flex.

Armacell operates 19 manufacturing facilities in 13 countries, and serves 30 countries around the world. Barclays advised Investcorp. – David Cox

content
at 3:59pm

Synagro files Chapter 11 to implement $455M sale to EQT

synagro logoSynagro Technologies has agreed to sell substantially all of its assets to an investment fund controlled by EQT, a European private equity firm, in a transaction valued at $455 million, the company announced this afternoon.

The company did not provide details of the proposed transaction, although it did say that it would implement the transaction through a Section 363 sale under the Bankruptcy Code, and that it filed for Chapter 11 in Wilmington, Del., today as a result. The company said it anticipates completing the sale in 60-90 days.

The company also said that in connection with the filing, “certain existing lenders” have committed to provide it with a $30 million DIP facility. The company said that the financing, along with operating cash flow, would “provide ample liquidity to operate the business and meet ongoing obligations to customers, vendors, and employees through the completion of the sale process.” Again, no details were provided.

The complete Chapter 11 filing was not yet available from the bankruptcy court.

The company’s senior debt is through Bank of America Merrill Lynch, which provided Synagro with $540 million in first- and second-lien debt to support a 2007 buyout by the Carlyle Group. The debt comprises a $100 million revolver maturing in this month, as well as a $290 million first-lien term loan and a $150 million second-lien term loan, both maturing on April 2, 2014. The company repurchased $31.85 million of the second-lien debt pursuant to a March 2009 tender.

While included as part of the sale of assets, Synagro said its special-purpose entities, which include its facilities in Philadelphia, Baltimore, and Sacramento, were not included in the Chapter 11 filing.

The first-lien facility is a component of the S&P/LSTA Leveraged Loan Index, and with the Chapter 11 filing, the default rate of the Index by principal amount now stands at 1.91%, versus 2.21% in March and 1.27% at year-end, according to LCD. The rate is a 12-month rolling average, so the decline versus last month reflects last year’s defaults dropping out of the calculation.

By number of loans, the default rate is now at 1.67%, versus 1.83% in March and 1.36% at year-end, the data shows.

Synagro is being advised by the law firm of Skadden Arps Slate Meagher & Flom, along with financial adviser AlixPartners and investment bankers Evercore Partners. – Alan Zimmerman