KPS completes $400m in recaps

KPS Capital Partners has recapitalised two portfolio companies – auto-parts supplier HHI and Attends Healthcare – for almost $400 million, collecting about $210 million in cash distributions for investors.

KPS, a mid-market turnaround firm, completed a $300 million recapitalisation of HHI Group, an auto-parts supply company KPS first acquired in 2005. KPS bought HHI out of bankruptcy as an acquisition platform, and grew the company through add-on investments. The firm owns 100 percent of the common stock in HHI, a source told PEO.

The financing includes a $100 million committed but undrawn asset-based revolving credit facility and a $200 million term loan. Bank of America Merrill Lynch acted as lead arranger for the $100 million facility, and that bank along with Credit Suisse were lead arrangers for the term loan.

Proceeds from the financing are being used to refinance outstanding debt, and to fund a $150 million cash distribution to stockholders and fund the company’s growth, representing a 3x cash-on-cash return, according to a person with knowledge of the deal.

After the recapitalisation, HHI will be levered at 2.5x earnings before interest, taxes, depreciation and amortisation.

The firm, which manages about $2.6 billion of committed capital, also recapitalised Attends Healthcare for $98 million to refinance outstanding debt and fund a $60 million cash distribution for stockholders and to fund company growth. KPS and management own 100 percent of the company’s common stock.

The financing package includes $20 million asset-based revolving credit facility and $78 million in term loans. Stockholders will see a 4x return on investment from the distribution, according to the source.

The recapitalisation will leave Attends levered at 3.2x EBITDA, the source said.

In the first quarter, KPS has distributed a total of $260 million, a source said. That includes a $50 million distribution from portfolio company Global Brass and Copper, the source said.

KPS is investing from its third fund, which totals $2 billion. The firm closed Fund III in 2007 on $1.2 billion, but reopened fundraising for existing investors, eventually closing on an additional $800 million.