3i seals €275m refinancing for Dutch retailer

The dividend recap is the latest example of GPs taking advantage of improved credit conditions.

3i Group has secured a €275 million refinancing for Action, a Dutch discount retailer. 

The senior C add-on financing will increase total senior debt facilities to €621 million. The debt will be used to refinance a more expensive vendor loan note in full, partially repay shareholder loans and finance a dividend to shareholders, 3i said in a statement. 

3i will receive total cash distribution of approximately £58 million from this transaction, with funding expected to take place on 9 September. The distribution will be included in 3i’s distribution calculation for 2014, which now totals £723 million. 

Action mandated BNP Paribas, Natixis, Rabobank and UBS to arrange the €275 million financing. The deal received strong support from a “high quality syndicate of banks and funds”, with both existing and new lenders committing to the add-on facility, 3i said. 

Action: taking
advantage of
improved
debt market.

Action has been owned by 3i since June 2011, when the firm acquired a majority stake in the business. Since then, Action has grown significantly with its EBITDA increasing to €99 million in 2012 from €71 million in 2010. 

Due the high cash flow conversion and strong performance, the business has rapidly de-levered which according to 3i, “provided ample scope” to arrange the add-on financing.  

“New financing commitments were significantly oversubscribed, indicating the quality of Action’s credit. Action continues to grow and internationalise at an impressive rate and this only reaffirms our investment case,” Menno Antal, Managing Partner and co-head 3i Private Equity, said in the statement. 

Action, which was founded in 1993, is a large non-food discount retailer with shops in the Netherlands, Belgium and a growing presence in Germany and France. The company sells a selection of branded and non-branded product categories, including DIY, personal care, household and textiles. The business, which has opened 48 new stores this year, currently has 369 stores and employs more than 11,000 people. 

With its refinancing of Action, 3i is the latest example of GPs taking advantage of the improved credit conditions in Europe. IK Investment Partners’ Minimax Viking is also understood to be in the pipeline, while Bridgepoint recently unwrapped a £375 million refinancing for sandwich business Pret a Manger, which will fund a £150 million pay-out to investors.  

Dividend recaps are still on the increase in Europe, according to recent research by ratings agency Standard & Poor’s. In Q2, volumes reached €2.27 billion, compared to approximately €2 billion in Q1.  In Q2, the majority of the total – about €1.5 billion – was financed by the bond market, with the remaining €770 million by the traditional loan market. That’s a significant jump from Q1, where about €1 billion of recaps were financed via the bond market and the rest via the loan market, according to S&P. Overall, the agency said, total European leverage finance issuance rose to €41.8 billion in Q2, up from €37.2 billion in Q1.  

The relatively weak exit environment is one reason why GPs are turning to recaps, Ken Goldsbrough, a managing director at Houlihan Lokey, told PEI recently. “It’s easier to do a dividend recap than it is to do a full sales process. So if sponsors feel they won’t be getting the right sales multiple, taking advantage of the hot debt markets can be a good way of taking money off the table.” They can also be an effective way to boost performance, he says. “If you do a recap or even two and you sell the company afterwards, you can do very well in terms of overall returns.”

Read more about trends related to dividend recaps in PEI’s September issue