Black Diamond exits Smarte Carte

Black Diamond has unloaded baggage-cart rental outfit Smarte Carte, selling the company to Macquarie Bank in a deal yielding an almost 6x return multiple.

Black Diamond Capital Management has booked a significant profit through its investment in airport baggage cart and locker concessionaire Smarte Carte, selling the company to Australia’s Macquarie Bank in a roughly $270 million (€223 million) deal.

Black Diamond has unloaded Smarte Carte after a successful turn-around of the business.

Black Diamond began investing in Smarte Carte at the end of 2003. The firm initially gained exposure to the Minnesota-based company by accumulating a senior secured debt position, and ultimately became the largest lender to Smarte Carte.

When the troubled company emerged from bankruptcy protection last February, Black Diamond was able to convert its debt holdings into a roughly 76 percent stake in the company’s common stock. GE Commercial Finance, which was also a debt holder, held the balance.

There was no disclosure as to how much capital Black Diamond put into the property, but according to reports, previous owner Castle Harlan had attempted to acquire the business for between $135 million and $155 million just ahead of its bankruptcy filing, giving a rough picture of the company’s value.

Court records, however, indicate that Black Diamond put in claims amounting to $35 million in the bankruptcy filing, which would imply a return of no less than 5.8x the firm’s investment.

Smarte Carte has a long history of private equity ownership. Castle Harlan had previously controlled the business, acquiring it in 1993. From there Smarte Carte was passed off to Haas, Wheat & Partners and Blum Capital Partners before ultimately going bankrupt. At the time of its Chapter 11 filing, the company had amassed $192 million of debt, which proved too onerous following a pause in airport traffic after the 2001 terrorist attacks.

Through the bankruptcy, the debt load was pared down to $14 million, and even before the filing, the company was reportedly already profitable on an operations basis.

Black Diamond, which maintains offices in Lake Forest Illinois, Greenwich Connecticut, and the US Virgin Islands, has an investment palate that ranges in style from hedge fund to private equity. Last week the firm announced a bankruptcy deal to acquire certain assets of American Remanufacturers, demonstrating its penchant for control, but other investments, including a senior secured facility in American Skiing Company, would more closely reflect the firm’s hedge fund roots.

Black Diamond declined comment for this story.