Griffin's Said to Pay PEP Dividend With Five-Times Leverage Deal

Griffin’s Foods, a New Zealand biscuits maker, will borrow more than five times its earnings to partly pay its private equity owners a cash dividend, according to a person familiar with the matter.

The company, controlled by Sydney-based Pacific Equity Partners Pty, will receive a more than NZ$400 million ($316 million) refinancing package, said the person who asked not to be identified because the details are private. The senior facility will be about 3.25 times the earnings of Griffin’s Foods and the mezzanine about two times, the person said.

The ratio of debt to earnings before interest, taxation, depreciation and amortization at Griffin’s Foods will be almost double that of listed Australian and New Zealand food and beverage companies, according to data compiled by Bloomberg. Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia and Westpac Banking Corp. agreed to lend senior debt through their New Zealand units, with KKR & Co. and JPMorgan Chase & Co. providing so-called mezzanine finance, separate people said this week.

The deal will facilitate PEP’s second dividend recapitalization in as many months, the data show. The investment company last month arranged A$700 million ($643 million) in loans to refinance its Link Group Inc. investment, of which part will be used for a dividend payout.

Sluggish Growth

Banks are competing more aggressively in niche markets such as leveraged loans to counter sluggish credit growth. Australian lenders are offering the easiest terms on such loans since the global financial crisis to lure local borrowers back from U.S. markets that offer greater amounts, longer tenors and less financial checks, or covenants.

PEP bought Griffin’s for an enterprise value of NZ$385 million in June 2006, according to the private equity firm’s website. The company has secured about $2 billion of funds this year to refinance its companies, which also include American Stock Transfer & Trust Co., Link Group and Hoyts Cinemas Group, according to Bloomberg-compiled data.

The investment company has also been considering taking the Griffin’s Foods deal to the U.S. Term Loan B market, which offers larger loans, while imposing minimal financial checks on borrowers, the person said. The inclusion of mezzanine debt, which is akin to equity finance, in the local offer helped convince the senior lenders to agree to easier covenants, according to the person.

Griffin’s Foods sells “New Zealand’s favourite biscuits” and has been making snack foods since 1864, the company says on its website. It sells more than NZ$300 million of products a year, including brands featuring the iconic Cookie Bear.

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