WaveDivision Holdings LLC, the West Coast cable provider taken private two years ago, is borrowing $150 million to pay a dividend to owners including Oak Hill Capital Partners LP and GI Partners LLC.
The five-year securities will have a payment-in-kind option, allowing the company to pay interest with additional debt, according to Standard & Poor’s. The credit-rating company ranks the bonds B-, six levels below investment grade. Moody’s Investors Service rates the securities one level lower at Caa1.
Companies are taking advantage of the Federal Reserve’s easy-money policies by selling PIKs, one of the riskiest forms of debt. Issuers have sold $2.94 billion in eight PIK deals to pay dividends this year, compared with $1.74 billion in five offerings in the similar period of 2013, according to data compiled by Bloomberg.
WaveDivision’s offering reflects an “aggressive” financial policy and will increase its ratio of debt to earnings before interest, taxes, depreciation and amortization to 6.9 times from 5.9, according to a Moody’s rating statement.
Oak Hill, run by Glenn August, and GI Partners bought the Kirkland, Washington-based company that operates in that state, Oregon and California for an undisclosed sum in 2012.
High-yield, or junk, debt is rated below Baa3 by Moody’s or less than BBB- by S&P.
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