Carlyle's Sequa Roiled in Debt Market as Earnings Said to Tank

Updated on
  • Aerospace parts servicer said to post 39% decline in 3Q Ebitda
  • Sequa results hurt by competition, slowing economies

Sequa Corp. debt plunged to record lows this week after the aerospace parts servicer controlled by Carlyle Group LP told creditors its third-quarter earnings fell nearly 40 percent, according to two people with knowledge of the company’s performance.

The company’s $1.3 billion term loan slid 3.4 cents to a low of 70.4 cents on the dollar Friday, according to prices compiled by Bloomberg. The loan was quoted at 83.4 cents last week, the data show. Its $350 million of unsecured notes due December 2017 lost more than 11 cents to trade at 40 cents on the dollar Monday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Sequa, which doesn’t publicly disclose its financial data, told creditors its business produced $34.5 million of adjusted earnings before interest, taxes, depreciation and amortization, compared with $56.1 million in the corresponding 2014 period, said the people, who asked not to be identified discussing the private report.

Cash Dwindles

In August, Sequa disclosed privately to investors in August that it burned through nearly half of its cash during the second quarter as its business selling spare airplane parts suffered, people with knowledge said at the time.

Andrew Farrant, a spokesman for Palm Beach Gardens, Florida-based Sequa, and Randy Whitestone, a spokesman for Washington-based Carlyle, declined to comment. Carlyle took the aerospace company private in a $2.7 billion leveraged buyout eight years ago.

Companies like Sequa have come under pressure as manufacturers of original engine components such as General Electric Co. and Rolls-Royce Holdings PLC have jumped into the market. Secondary parts sellers have been suffering amid economic slowdowns in developing markets that have sucked away demand for repairs and upgrades of private and commercial jetliners.

The company said its sales declined 9.7 percent to $327.8 million in the three months ended Sept. 30 from $362.9 million a year earlier, said the people.

United Airlines

Revenue from its Chromalloy division, which sells repair services and manufactured parts for commercial and U.S. military jet aircraft engines, continued to decline. Sales in the segment, which counts United Airlines Inc. as a customer, declined 14.7 percent to about $187 million, said the people.

The company’s Ebitda from January through Sept. 30 was $107.3 million, the people said. That represents a decline of almost 30 percent from $149 million in the comparable period a year ago, they said.

Sequa ended the quarter on Sept. 30 with $37.3 million in cash, said the people. It had had just under $45 million on June 30, people with knowledge of the matter said in August.