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Shock Doctor Sports uses $205M loan to fund merger with McDavid

Bregal Partners portfolio company Shock Doctor Sports has closed its merger with another sports-protection and performance-equipment company, McDavid. The acquisition was supported by $130 million of first-lien financing as well as $75 million of second-lien debt, according to market sources.

The arranger group includes Ares Capital, BMO, NewStar Financial, NXT Capital, and Madison Capital, sources note.

In addition to funding the acquisition, proceeds from the deal were used to refinance debt. Ares Capital was agent on the existing senior credit for Shock Doctor that backed Bregal’s buyout of the company in March of last year from Norwest Equity Partners. That financing included a term loan and revolver.

Minnetonka, Minn.-based Shock Doctor is a maker of mouth guards, impact gear, baseball equipment, insoles, performance-sports-therapy products, and performance apparels. McDavid manufactures, designs and markets sports medicine, sports protection and performance apparel for active people and athletes. The company is headquartered in Chicago, with subsidiaries in Japan and Europe. – Jon Hemingway

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Sycamore Partners taps Fossati as Director of Capital Markets

Sycamore Partners this morning announced that Paul Fossati has joined the firm as a managing director and Director of Capital Markets.

In this newly created role, Fossati will be responsible for all financings for the firm’s new investments and its existing portfolio companies. He will also be responsible for managing Sycamore’s relationships with financing sources.

Fossati was previously at Morgan Stanley, where he was a managing director in the firm’s Leveraged & Acquisition Finance Group and head of both the consumer-retail and financial sponsor verticals.

New York-based Sycamore Partners is a private equity firm specializing in consumer and retail investments. The firm has more than $3.5 billion in capital under management. Its portfolio currently includes Aeropostale, Coldwater Creek, Hot Topic, Jones New York, the Kasper Group, Kurt Geiger, MGF Sourcing, Nine West Holdings, Pathlight Capital, Stuart Weitzman, and Talbots. – Kerry Kantin

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LifeTime Fitness nets leveraged loan backing LBO by Leonard Green

Deutsche Bank, Goldman, Sachs, Jefferies, BMO Capital Markets, RBC Capital Markets, Macquarie Capital, and Nomura will provide debt financing for the acquisition of Life Time Fitness by Leonard Green & Partners and TPG.

The transaction announced earlier today is valued at more than $4 billion. Other key investors include LNK Partners and Life Time CEO Bahram Akradi, who will remain in his role and has committed to make a rollover investment of $125 million in Life Time common stock.

Under the terms of the merger agreement, the investors will acquire all of the outstanding shares of Life Time Fitness common stock for $72.10 per share in cash. This price represents a significant premium to Life Time’s closing share price of $41.60 on Aug. 22, 2014, the last trading day prior to the announcement that the issuer was exploring a potential conversion of real estate assets into a real estate investment trust.

Life Time had total debt of roughly $1.2 billion at year-end 2014, according to an SEC filing. EBITDA for the fourth quarter of 2014 was $86.8 million compared to $80.4 million in the year-ago equivalent period. For 2014, EBITDA was $374.3 million compared with $351.8 million in the prior-year period.

The merger is subject to approval from Life Time’s shareholders and other customary closing conditions. The transaction is currently expected to close in the third quarter of 2015. – Staff reports

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Blue Coat nets financing for $2.4B buyout by Bain Capital

Jefferies will provide debt financing to back Bain Capital’s $2.4 billion purchase of Blue Coat Systems, which was announced earlier today, sources said.

Jefferies also led the issuer’s existing loan deal. Blue Coat in early 2014 repriced its covenant-lite term loan B due May 2019 to L+300, with a 1% LIBOR floor, and upsized it to $746 million. In June 2013, the issuer tapped the market via Jefferies and Goldman Sachs for a $330 million, second-lien term loan to finance a dividend. That loan cleared at L+850, with a 1% floor, and is callable at 102 through June, when the premium falls to 101, according to sources.

Thoma Bravo and an investor group that includes Teachers’ Private Capital purchased Blue Coat for $1.3 billion in early 2012, investing roughly $500 million in cash.

Sunnyvale, Calif.-based Blue Coat sells security software to businesses to protect against malware and control employee access to the Internet. – Chris Donnelly 

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New LBO deals rein in leverage amid regulatory pressure

LBO leverage ratios

Regulatory pressure is curtailing how aggressively new leveraged buyouts are being structured, a fact made clear by recent credit statistics.

Since the Shared National Credit Review of last summer, the average debt multiple of new large LBOs – the most consistent sample LCD tracks when it comes to credit stats – has eased to an average of 5.6x over the past five months, from 5.8x during first three quarters of last year and a recent apex of 6.3x during the third quarter of 2014. – Steve Miller

 Follow Steve on Twitter for leveraged loan news and insight.

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ScentAir Technologies nets buyout loan from TPG Specialty Lending

TPG Specialty Lending added a loan backing scent marketing company ScentAir Technologies to its investment portfolio late last year.

The 7.5% first-lien loan due 2019, at $15.6 million on a cost basis and at fair value, was initially acquired in December 2014, a Form 10-K for 2014 filed yesterday showed. The loan was originated in connection with a buyout by a sponsor.

There were other lenders, in addition to TPG Specialty Lending, behind the acquisition financing for ScentAir, sources said.

The ScentAir Technologies loan is held at least in part by TPG SL SPV, LLC, which is a subsidiary formed in March 2012 that has a revolving credit agreement with Natixis.

ScentAir Technologies, based in Charlotte, N.C., sells scent delivery systems to create ambient scents in business settings worldwide, including retail environments, hotels, and healthcare industries. Darien, Conn.-based Alerion Partners had been an investor in the company, according to S&P Capital IQ.

TPG Specialty Lending is a BDC that lends to middle-market companies and trades on the New York Stock Exchange under the symbol TSLX. The company targets U.S.-based middle-market companies generating annual EBITDA of $10-250 million, mainly through direct origination of senior loans, but also through mezzanine loans, bonds, and equity investments. – Abby Latour

Follow Abby on Twitter for middle market loan news and insight. 

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PetSmart trims pricing anew on TL; recommits due Tuesday

A Citigroup-led arranger group today cut pricing for a second time on the $4.3 billion covenant-lite B term loan backing BC Partners’ acquisition of PetSmart, lowering the spread by an additional 25 bps, to L+400, according to sources.

The 1% LIBOR floor and 99.5 offer price are unchanged from yesterday’s reverse-flex, but note that original guidance was for pricing of L+450-475, with a 1% floor and a 99 OID.

With today’s change, the loan offers a yield to maturity of about 5.19%, versus 5.45% after yesterday’s reverse-flex and 5.8-6.07% at the initial guidance.

Recommitments are due by 5:00 p.m. EST on Tuesday, Feb. 17, and sources note that no new commitments are being accepted. Allocations are expected in the latter half of next week.

Citigroup, Barclays, Deutsche Bank, Nomura, Jefferies, RBC Capital Markets, and Macquarie are arranging the loan; Natixis is a co-manager on the financing.

Though the LBO is expected to close the week of March 9 (the shareholder vote is slated for March 6), a ticking fee of the full spread and floor would kick in on Friday, March 20, should closing be delayed, sources noted.

Ratings are at B+/B1 corporate and BB-/Ba3 on the term loan, with a 2 recovery rating.

The transaction, which was announced in December, is valued at about $8.7 billion, which represents a 9.1x multiple of PetSmart’s adjusted EBITDA for the 12 months ended Nov. 2, according to the company.

Leverage is being marketed at 4.5x net secured, 6.3x net total, sources said.

The transaction includes an incremental facility of $800 million, plus the amount of voluntary prepayments of the TLB plus an unlimited amount up to net first-lien leverage at closing (including capital leases and borrowings under the ABL), subject to 50 bps MFN protection, sources noted.

The issuer is also seeking to put in place $1.9 billion of eight-year (non-call three) unsecured notes via a Barclays-led bookrunner group. A roadshow runs through next Thursday, for pricing thereafter.

The debt financing also provides for a $750 million asset-based facility.

The consortium, including funds advised by BC Partners, alongside several of its limited partners, including La Caisse de dépôt et placement du Québec and StepStone, will pay $83 per share in cash for PetSmart. Longview Asset Management, which owns or manages about 9% of PetSmart’s outstanding shares, has committed to vote in favor of the transaction and will participate in the consortium, retaining roughly one third of its current stake, the company said.

The sponsors, excluding Longview, will kick in up to $1.83 billion of equity; Longview will roll over approximately three million of its current shares, the filing notes.

The Phoenix-based retailer operates approximately 1,387 pet stores in the U.S., Canada, and Puerto Rico. – Staff reports

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Private equity: Sponsors are busy, but public-to-private deals remains scarce as stocks rise

public to private deals

In recent years the time-honored LBO process – a private equity shop finds a public company, buys it using debt, then cashes out later - has become a victim of its own success, as PE firms have helped encourage corporate America to slim expense lines, driving profit margins to all-time highs.

At the same time, record stock prices have driven purchase-price multiples up even as regulatory pressure has put a cap on leverage. These factors have hurt the ability of PE firms to find suitable LBO candidates despite their full war chests, which Prequin says totaled roughly $397 billion at the end of 2013.

Therefore, participants expect PE firms to continue to work their portfolio companies via tack-on deals, sponsor-to-sponsor trades, and recaps, when the window for such deals is open. Meanwhile, straight public-to-private deals remain most rare. – Steve Miller

This analysis is part of a longer look at new issuance in the leveraged loan space. It is available to LCD News subscribers here.

For leveraged finance news and market talk follow Steve Miller on Twitter.

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Pabst to be acquired by Russia’s Oasis Beverages, PE firm TSG nets minority stake

pabst2UBS is leading the debt financing that will back the acquisition of Pabst Brewing Company by Oasis Beverages, according to sources. Private equity firm TSG Consumer Partners will take a minority stake in the business. No other details of the acquisition or the financing were disclosed.

Oasis is a beer and beverage company with operations in Russia, Ukraine, Kazakhstan, and Belarus. Current Oasis chairman and founder Eugene Kashper will serve as the CEO of Pabst.

Current owner C. Dean Metropoulos & Co. acquired Pabst in 2010 from Kalmanovitz Charitable Foundation for $250 million, according to S&P Capital IQ.

Pabst Brewing’s portfolio includes iconic brands such as Pabst Blue Ribbon, Lone Star, Rainier, Ballantine IPA, Schlitz, Old Style, Stroh’s and Old Milwaukee. The company was founded in 1844 and is based in Los Angeles, Calif. – Staff reports

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Senior team from Brazos forms new middle market PE firm

A senior team from Brazos Private Equity Partners, a private equity firm that is winding down, today unveiled plans to set up a new firm targeting control investments of middle market companies.

 brazosRandall Fojtasek, former co-founder and co-CEO of Brazos Private Equity Partners, LLC, will lead CenterOak Partners. Ex-Brazos senior executives Michael SalimLucas CutlerJason Sutherland, and William Henry are joining him.

Dallas-based CenterOak Partners is targeting buyouts and recapitalizations in the U.S. industrial growth, consumer, and business services sectors, with a particular focus on southern and southwestern companies. The new firm plans to build a diversified portfolio of platform investments and invest $20-70 million of equity.

At Brazos, Fojtasek managed $1.4 billion of private equity capital across three funds and oversaw the deployment of over $2.5 billion in transaction value.

In March, peHub reported that Brazos Private Equity Partners would split and raise separate funds in an amicable departure of partners that also included Jeff Fronterhouse and Patrick McGee.

Last week, Brazos announced the close of a dividend recapitalization of optometrist and dentist supplier Vision Source with financing from Golub Capital. In June, Brazos-backed wine distributor Winebow placed debt backing a merger with Vintner Group, a portfolio company of Brockway Moran & Partners.

“They’re still going to manage the portfolio companies at Brazos through the entire lifecycle,” said Megan Griffin at BackBay Communications. “It was a timely moment for the partners to pursue other business opportunities.”

The Brazos Equity Fund III closed oversubscribed in September 2008 with capital commitments of over $700 million, targeting middle market companies with enterprise values of $50-400 million mainly in southwestern U.S. manufacturing, consumer, healthcare, distribution, and financial services companies.

Brazos II closed in 2005 with commitments of $400 million. The first Brazos fund closed in 2000 with commitments of $250 million. – Abby Latour