The middle market leveraged-finance market has been bookended as of late by the frothiness of the market compounded by the lack of quality M&A opportunities. This has led, in some circles, to aggressive buyouts on both the equity and debt side, for new inventory, while others have stood on the sidelines using their capital for bolt-on investments and refinancings, said multiple market participants.
Coming in on all of these angles as of late has been industry lynchpin Antares Capital, which closed four new platform deals last month of all shapes and sizes. Antares is close to its two-year anniversary of CPPIB’s USD 12bn buyout of GE Capital’s former sponsors business. What’s been giving Antares the advantage as of late has been its reliance on permanent capital, flexibility on capital structures and its deep book of portfolio companies and sponsor relationships.
One of those deals was Kohlberg & Co.’s buyout of CIBT Global, a McLean, Virginia-based provider of travel mobility services. Antares provided the first and second lien facilities. Owl Rock Capital, a business development company, took a USD 49m position in the Libor+ 775bps second lien facility due 2025, according to SEC filings.
This became the third generation of financing Antares has participated in for the company, having supported two other sponsors in their respective ownerships of CIBT, according to David Brackett, the co-CEO of Antares Capital, in an interview with this news service.
“The sponsor is going to have confidence in us closing the deal, given that we know management and their story, and [they] have seen our ability to support growth and adds over time,” said Brackett.
Overall it has been a difficult environment to book new assets, as Antares had flat loan volumes over 1H17 year-over-year, and the forecasts over the back half of the year may not be that much better, Brackett stated.
“Sponsors are telling us that it’s gotten too expensive,” he added, despite macro-economic indicators being positive. Through the end of May, Antares’s 450 portfolio companies showed revenues and EBITDA on a TTM basis up 10% and 8.5% respectively, he said.
The frothiness of the market has certainly yielded some interesting deals, such as Ares Capital’s all-equity buyout of Deva Holdings. Jefferies marketed the business off LTM EBITDA of USD 12m and the business traded for 14x, said a source close to the situation. Ares did not return calls seeking comment.
In another unique deal, Antares participated in backing Golden Gate Capital’s buyout of Express Oil Change & Tire Engineers from Carousel Capital. Antares, along with Guggenheim Capital, provided covenant-lite unitranche financing at 6.5x EBITDA, said two sources close to the situation.
Brackett attributes that deal to being a case of Antares picking their spots “where we believe the company’s profile, management team and sponsor are capable of handling that leverage.”
As has been reported by Debtwire Middle Market, Express Oil was drawing premium bids as a franchisor of auto repair shops with a national footprint and a diverse array of services.
Brackett said his team was recently presented with two other covenant-lite opportunities in a cyclical business and one with narrow margins, but he felt those deals needed covenants and passed on the opportunity.
On the auction block, Pritzker Group has engaged Moelis to exit its seven-year stewardship of medical equipment manufacturer Clinical Innovations. The Utah-based manufacturer of uterine catheters and other medical devices used in labor and delivery is being marketed at just over USD 20m in LTM EBITDA. Pritzker Group acquired the business from Roundtable Healthcare Partners in 2010.
Elsewhere, the sponsor for luxury pen purveyor Cross has hired Lincoln International to run a sales process. The Lincoln, Rhode Island-based company, which manufactures fine writing instruments, is being marketed at EBITDA of just under USD 8m and revenue of USD 90m for FY18. Clarion Capital Partners formed the company when it acquired the Cross Accessory Division from AT Cross in 2013 and later did a bolt-on acquisition in 2014.
Finally, Oaktree Capital Management was the favorite to acquire BDC asset manager Fifth Street Asset Management (FSAM). Fifth Street had been working on a sale with Morgan Stanley. FSAM holds the fee-generating management contracts for two business development companies (BDC)-Fifth Street Finance Corporation and Fifth Street Floating Rate Corporation. FSAM generated USD 42.3m in LTM EBITDA and was expected to trade in the 4x-to-6x range.