Platinum Equity’s rapid Cision dividend erodes equity cushion to 29%, increases leverage by a turn
Platinum Equity’s unusual move to take a debt-financed dividend from Cision the week after it placed the company’s LBO financing takes the sponsor’s playbook for quick dividends to a new extreme. A USD 300m eight-year unsecured bond roadshowing this week caps an issuer-friendly month in the capital markets – but the deal launches on a jittery day for stocks that has already led some issuers to put a pause on fundraising plans.
Cision’s new bond, which will add a turn of leverage to the capital structure, was made possible by a restricted payment carveout for incremental debt issuance that the borrower added to its credit agreement last week before pricing the LBO loans, sources noted. Although investors expected Cision to tap the USD 300m basket at some point, the rapid turnaround surprised even the most cynical, several sources said.
Platinum arguably over-equitized the deal to begin with, as issuers with B3 corporate ratings struggled throughout the back half of last year, one of the sources said. “But the market unfolded in their favor,” he noted.
As such, Platinum already reduced its equity check last week, and upsized its term loan by USD 200m before allocating the deal. The deal initially received B/B2 corporate ratings, but after the USD 200m upsize – alongside the incremental carveout – both agencies cut the ratings to B-/B3.
After the upsizing found plenty of demand, “they probably figured the market is so hot why don’t we try and do this dividend if it’s available,” the source said.
On Friday (24 January), the software provider priced a USD 1.2bn Libor+ 375bps TLB due 2027 and a EUR 500m Euribor+ 375bps TLB due 2027, both at a 99.5 issue price, in a deal led by Bank of America. The dollar-denominated loan softened today by about a half-point, to 99.25/99.75 from levels bracketing par on Friday, said a source.
Also late on Friday, BofA announced the roadshow for the USD 300m senior notes, which will run through the end of the week for the debut high bond issue.
Meanwhile, today marked the start of a possible pullback in leveraged loan and high yield bond activity, as investors watched stocks fall amid jitters tied to the spread of the coronavirus. The S&P 500 shed 50 points (1.5%) today to close at USD 3,245.59.
Against that backdrop, at least two loan issuers (GFL Environmental and Jane Street) postponed bank meetings set for today. And no high yield deals were announced, in contrast to the prior two weeks in which no fewer than four new deals were announced on the first business day of the week, Debtwire data shows.
But with Cision the only bond deal currently in the market, it should attract sufficient investor interest, several of the sources said.
Cision is marketing the notes on pro forma adjusted EBITDA of USD 314m, putting pro forma leverage at 5.6x through the loans and 6.5x through the notes.
During the loan syndication, several investors said they excluded the USD 48m of run-rate cost savings from their own calculations, using the adjusted EBITDA figure of USD 266m instead. Without cost savings, leverage post-dividend deal is 6.5x through the first lien and 7.7x total.
The dividend reduces Platinum’s equity exposure in Cision to USD 850m, or around 29% of the company’s total pro forma capitalization. That compares to Platinum’s USD 1.15bn equity check (40%) before the dividend – and approximately USD 1.3bn in equity (46%) when the loan first launched syndication.
Platinum’s history of quickly timed dividends includes WS Packaging, for which it waited two months in 2018 before taking a chunk of its investment back. The sponsor received a USD 251m dividend with proceeds from a USD 250m secured bond issuance and cash on hand. WS now trades as LABL Inc after merging with Multi-Color last year.
Platinum-backed Vertiv tapped the market in February 2017 for a PIK toggle note to pay a dividend, just four months after its buyout. After reducing the dividend and making several document changes, Vertiv priced the deal at an all-in yield of 12.55%.
And Platinum took equity off the table in BlueLine Rentals in 2014 with a USD 202m dividend raised just a month after closing the acquisition. Platinum paid USD 1.1bn for BlueLine and financed the deal in January of that year with USD 760m in secured notes due 2019.
Calls to Platinum and Cision were not returned. Bank of America declined to comment.
Leave a Reply