- KKR, Silver Lake, Technology Crossover Ventures are backers
- Company planning IPO later this year
- Rocket Software scraps dividend plan
Go Daddy Operating Co. is securing a $1.1 billion loan that will be used to refinance existing debt and fund a one time dividend, spokeswoman Karen Tillman said in an emailed response to questions from sister website peHUB. The $350 million distribution will go to Go Daddy’s investors, which include Kohlberg Kravis Roberts & Co and Silver Lake, Tillman said.
News of the payout caused Moody’s Investors Service Inc to change Go Daddy’s ratings outlook to negative from stable. The debt-funded dividend will boost Go Daddy’s debt-to-EBITDA leverage by about 1.5x to near 7.0x, Moody’s said in a statement. However, a source said Go Daddy’s net debt will rise to just 5.9x with the new loan.
Scottsdale, Arizona-based The Go Daddy Group provides domain name registration, web hosting and on-demand Internet services. The company produced $1.13 billion in revenue, Moody’s said. Go Daddy is the largest domain name registrar and generates predictable operating cash flow as a result of its very good customer retention rates, Moody’s said.
“At the same time, the company operates in a highly competitive market for web services, which is characterized by low barriers to entry, modest pricing power for basic products, and the low attach rates for add-on services that result in low average revenue per user (ARPU),” the ratings agency said.
The dividend is the first for Go Daddy since it was sold to three institutional fund managers in 2011. At that time, KKR and Silver Lake led a group to buy Go Daddy in a deal valued at $2.25 billion. Technology Crossover Ventures also invested. The three firms, along with Go Daddy founder Bob Parsons, invested $1.3 billion equity as part of the deal. Go Daddy’s debt as of December 2011, once the sale closed, was $1.1 billion.
Go Daddy, which is known for airing commercials during Super Bowl games featuring scantily clad women, is expected to go public, Reuters reported in March. The company has hired Morgan Stanley and JPMorgan Chase to coordinate a stock sale that could come this year, The New York Times reported earlier this month.
Separately, Rocket Software has withdrawn a $725 million loan that it planned to use to refinance debt and fund a dividend to investors, according to sister service Thomson Reuters Loan Pricing Corp. Rocket Software, a software development firm, is backed by Court Square Capital Partners.
Executives from KKR, Silver Lake, Technology Crossover Ventures, Rocket Software and Court Square couldn’t immediately be reached for comment.
Luisa Beltran is a senior writer for peHUB.