Graham Partners‘ portfolio company Eldorado Stone LLC, which was acquired in February for approximately $30 million in equity (Buyouts March 12, 2001, p. 12), last month made its first add-on investment in L&S Stone Inc. The acquisition was financed with an undisclosed sum of senior credit led by CIBC World Markets, FleetBoston, and Firstrust. National City and Indosuez Bank provided the subordinated debt for the transaction.
“Attracting financing for the deal went relatively smoothly given where the debt market is,” said Christina Morin, a senior associate at Graham Partners. Lenders are looking for a high degree of assets and collateral, said Morin, adding that they’re also looking for financial sponsors to agree ahead of time to committing additional equity in supporting their portfolio companies, should Ebitda take a nose dive.
“I think that’s getting to be more common so that sponsors can get deals done,” she said.
Factors that have shielded Eldorado Stone and L&S Stone, manufacturers of stone veneer, from going the way of the economy has been the relative stability of the construction market and consumer spending. “Their product is taking share away from other traditional building material, such as vinyl sidings, stucco and natural brick, that compete with it, and by our estimation the combined entities would certainly have a market share of greater than 20%,” Morin said.
Morin added that L&S’s East Coast presence was a “very nice geographic compliment” to Eldorado’s West Coast customer base. Combined revenue for the two companies is approximately $70 million in sales.