Sole bookrunner JPMorgan has underwritten a £730m debt package backing private equity sponsor Lion Capital’s secondary buyout of FoodVest, a UK-based frozen food processor, from CapVest.
CapVest formed the £1bn-turnover company in 2006 by merging Young’s, Findus and the Seafood Company. FoodVest has 6,000 employees across 21 facilities in five countries.
Underlining the devastating effect of the credit crisis on the leveraged finance market, the deal is the biggest UK buyout so far this year, and the largest sole underwrite of a leveraged deal in Europe this year.
Debt will be split between £550m of senior facilities and £180m of mezzanine, which are likely to be formally launched to syndication after the summer. The deal is understood to have attracted reverse enquiry, which may see some form of early selldown or senior syndication prior to official launch.
Debt, leverage and capital structure on the secondary buyout are lower and more conservative than an aggressive £745m refinancing amendment put in place by CapVest last year.
Under the new structure, leverage will fall to 3.9 times through senior and 5.3 times through total debt.
The 2007 deal featured CapVest as both sponsor and vendor, with CapVest selling the company to management and to another of its funds, CapVest Equity Partners II. Bookrunners were JPMorgan, Merrill Lynch, SG and UBS.
At the time, debt comprised a £75m seven-year term loan A at 200bp over Libor, a £200m eight-year term loan B at 237.5bp, a £156m nine-year term loan C at 287.5bp, a £60m seven-year revolver at 200bp, a £44m nine-year acquisition line at 287.5bp, a £100m 9-1/2-year second-lien tranche at 437.5bp and a £110m PIK loan.
Leverage was initially 4.75 times through senior, 5.75 times through the second lien and 6.85 times total.
An amendment took out £113.5m of mezzanine debt, repaid vendor notes and funded a dividend. The deal closed oversubscribed.
Both Lion Capital and mid-market firm CapVest have a strong food and beverage focus. Last year Lion bought Vaasan & Vaasan, a branded bakery products business, from CapVest in a tertiary buyout. A €335m debt package supporting that deal was underwritten by sole mandated lead arranger JPMorgan, the deal also followed an earlier refinancing.
Lion Capital is reported to have seen off competition from Permira, owner of rival frozen food group Iglo Birds Eye, to win FoodVest, though CapVest did not run a formal auction.
So far this year London-based Lion Capital has defied the dearth of credit liquidity to win backing for a number of tough transactions. While the FoodVest deal is conservative, its size and sterling denomination will make for a reasonably tricky proposition in syndication.
As well as being partial to Findus’s iconic crispy pancake, Lion Capital is clearly unafraid of a stiff drink. The firm, along with Goldman Sachs European Special Situations Group and Central European Distribution Company (a leading Polish vodka distributor), has mandated Goldman Sachs, ING, RZB and UniCredit as joint mandated lead arrangers and bookrunners to arrange US$315m in senior secured credit facilities backing the buyout of Russian Alcohol.
The deal, which is currently in syndication, follows Lion Capital’s earlier LBO of juice company Nidan Soki, through Goldman Sachs, UniCredit (CA-BA) and VTB.