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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

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

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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

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Gates Global on deck for tomorrow with cross-border LBO loan

A Credit Suisse-led arranger group has scheduled a bank meeting for 10:00 a.m. EDT tomorrow, June 5, to launch a cross-border loan package backing the Blackstone Group’s purchase of industrial manufacturer Gates Global, according to sources.

The loan financing includes a $2.49 billion term loan, a €200 million ($272 million) term loan, a $125 million cash-flow revolver, and a $325 million asset-based RC. The seven-year term loans will be covenant-lite. The revolvers will mature in five years.

Credit Suisse, Citigroup, Morgan Stanley, Goldman Sachs, and Deutsche Bank, UBS, and Macquarie are arranging the transaction, while Citi will be left lead on the adjoining bond deal.

Commitments on the loan will be due on Thursday, June 19, sources added.

Blackstone in early April agreed to acquire Gates for $5.4 billion. Gates, which makes transmission belts and fluid-power products, is a division of global engineering firm Tomkins/Pinafore, which Onex Corp. and the Canada Pension Plan Investment Board jointly acquired in 2010 for roughly $5 billion.

For reference, Pinafore currently has roughly $1.3 billion outstanding under its B loan, according to a regulatory filing. –

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American Capital forms group to target lower middle market investments

American-Capital-AgencyPrivate equity firm American Capital has formed a group that will target lower middle-market companies generating EBITDA of $5-25 million for equity-control investments.

The group will focus on business and technology services companies, healthcare products and services companies, and industrial growth end market companies.

Sean Eagle, Eugene Krichevsky, David Steinglass, and Justin DuFour, all of American Capital, will lead the Bethesda, Md.-based group, which will initially comprise ten people.

The group, which will be part of American Capital Asset Management, will manage $445 million of committed capital.

The lower middle market buyout group will also manage a new $1.1 billion private equity fund, the American Capital Equity III (ACE III), unveiled earlier this month. The fund will purchase seven middle market companies from American Capital upon closing.

“The Lower Middle Market Buyout group complements our larger investment platform where we target middle and upper middle market buyout opportunities up to $750 million in size, as well as energy, infrastructure, and special situations investment strategies,” American Capital said in a statement.

ACE III was established by American Capital together with an investor group comprising funds advised by Coller Capital, Goldman Sachs Asset Management, and StepStone Group, as well as some sovereign wealth funds, state retirement and pension systems, high net worth family offices, superannuation funds, and certain foundations.

Portfolio companies of Nasdaq-listed American Capital include Luminator Technology Group, Datapipe, Potpourri Group, and SMG. – Abby Latour

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