Pets At Home Ltd., a U.K. pet accessories retailer owned by KKR & Co., got lenders to agree to a 135 million-pound ($205 million) loan to pay a dividend, according to two people with knowledge of the matter.
The term loan D, which is being arranged by KKR Capital Markets and Nomura Holdings Inc., will pay interest at 500 basis points more than lending benchmarks, said the people, who asked not to be identified because the deal is private. This is lower than the pricing range of 525 to 550 basis points proposed by the borrower, the people said.
KKR acquired Handforth, U.K.-based Pets At Home in 2010 and the company’s net debt has since fallen by about 40 million pounds to 386 million pounds while its earnings before interest taxes, depreciation and amortization, rose to about 92 million pounds, according to financial statements posted on its website. A record of improving performance can give lenders confidence to offer private-equity firms more debt.
Investors are willing to fund dividends to private-equity companies if they have the “right profile”, said Martin Horne, managing director at Babson Capital Europe Ltd. in London. “Releveraging those businesses to recap them at levels they can sustain is in fact an opportunity for us.”
Mivisa Envases SAU, the Spanish food-can maker partly owned by Blackstone Group LP, also plans a loan to help pay its owners a dividend, people familiar with the situation have said. The 145 million-euro ($189 million) term loan C will increase Murcia, Spain-based Mivisa’s debt to about 5 times Ebitda, according to a Standard & Poor’s report.
“Sponsors are looking to be more creative about how they achieve their exit,” Horne said. Lenders have a better understanding of the “credit resilience” of businesses given the time that’s passed since the 2008 collapse of Lehman Brothers Holding Inc., he said.
The low level of mergers and acquisitions has slowed the rate private-equity companies can sell the businesses they own, the Bank of England said in a report yesterday. The average length of investments for private-equity buyouts in 2008 is expected to be more than six years, double the figure for deals done in 2002, according to the report.
Pets At Home raised a 130 million-pound term loan C last year to replace mezzanine debt, Bloomberg data show. It agreed to pay initial interest of 550 basis points more than the London interbank offered rate for the loan. A basis point is 0.01 percentage point.