ABRY Corrals Senior Lenders For Data Firm

ABRY Partners did some extra leg work to club together senior financing to back its acquisition of Hosted Solutions earlier this month. The Boston-based LBO shop paid $140 million for the Raleigh, N.C.-based company that hosts and manages information-technology systems and Web sites for a wide variety of businesses.

No one institution was willing to underwrite the senior debt facility, forcing ABRY Partners to secure multiple senior debt commitments. The firm also increased the pricing on the debt in order to maintain the senior leverage ratios it wanted, said C.J. Brucato, a partner.

Ultimately, CapitalSource Financing LLC, Wells Fargo Foothill, CIT Group Inc. and TD Securities committed to the senior package. In addition, CapitalSouce, CIT, and ABRY Senior Equity Partners committed preferred equity, and management rolled over some equity. Previously known as ABRY Mezzanine Partners, ABRY Senior Equity Partners looks to invest in preferred stock with warrants, and it also supplies deeply subordinated debt or senior equity; it is currently investing from its second fund, a $650 million vehicle.

ABRY Partners signed up the deal in November but only closed it earlier this month because the transaction hinged on the company’s 2007 financial results.

ABRY Partners isn’t alone in having to work a little harder to secure financing these days. During the buyout boom a single bank could commit to financing a deal and then sell off pieces of the credit to other investors. But with the syndication market moribund, buyout firms have been forced to assume the role of debt arranger. Firms of all sizes—from mid-market shops such as Halyard Capital and CCMP Capital Advisors to bulge-bracket firms such as TPG and The Carlyle Group—have had to piece together financing commitments.

ABRY Partners is now concentrating on its plan to expand Hosted Solutions through add-on acquisitions and internally driven growth initiatives such as expansion into new markets. The company is already in conversations with two or three potential targets. “There is significant demand for high-quality data centers,” Brucato said.

This is ABRY Partners’s second deal in the data center market. In July, it acquired CyrusOne, a data center and IT infrastructure services provider based in Houston. The firm, known for media deals, has been researching the market for four years, drawn in part to its complexity and its need for capital expenditures, both of which can scare off other suitors.

DH Capital, a New York-based advisory shop, brokered the deal for Hosted Solutions, which has 80 employees in North Carolina and Boston.

ABRY Partners is investing from its $1.35 billion sixth fund, closed earlier this year. The firm has completed more than $21 billion of transactions since Andrew Banks and Royce Yudkoff founded it in 1989.—B.V. .