Bridgepoint is the latest private equity firm to take advantage of improving European credit conditions, having agreed to refinance sandwich business Pret a Manger for £375 million.
Following the deal, Pret a Manger’s leverage levels will rise to 4.2x EBITDA, up from 2x in 2012. When Bridgepoint acquired Pret a Manger in February 2008, its leverage was 5.2x EBITDA. The company has grown significantly under Bridgepoint, opening 110 new shops worldwide and more than doubling its profits. Its annual turnover is now approximately £380 million a year, according to the company’s website.
The European mid-market firm will use the new capital structure to pay out £150 million to investors in a dividend recap. It will also use approximately £100 million to expand the business further in the US, Europe and China, a source close to the matter told Private Equity International. The balance will reduce the company's debt by roughly one-third, as well as remove a mezzanine facility.
Bridgepoint acquired Pret a Manger
Media reports first surfaced regarding a refinancing back in February.
Bridgepoint bought the sandwich chain in 2008 for approximately £345 million using its Bridgepoint Europe III, a €2.5 billion, 2005-vintage fund. At the time the deal's debt package wasn't disclosed; Reuters reported previously it comprised £185 million in senior loans and a £35 million mezzanine tranche. Some of those loans were expected to mature in June 2015, it noted.
Bridgepoint declined to comment.
Bank of Ireland, BNP, HSBC, ING, RBS and Rabobank are the book runners to underwrite the debt facilities.
Private equity houses are increasingly looking at refinancings as a route to liquidity. In the first quarter of 2013, €2.3 billion of dividend recaps were completed, compared to €1.87 billion in the whole of 2012, according to a recent report published by rating agency Standard & Poor's.
“There's a very strong debt market. So it's a good time for borrowers to look at their capital structure either to refinance or to re-leverage, if that's the the right thing to do for the company and its balance sheet,” Ciara O'Neill, a managing director at DC Advisory, told PEI in a recent interview.