AEA Investors has been trying to exit its investment in CPG International for some time now.
The Scranton, Pa.-based manufacturer of plastic products designed to replace wood and metal building products filed to go public in May 2011, but has yet to debut on the public markets. In the meantime, last month, Moody’s Investors Service lowered its liquidity rating on the company.
Perhaps AEA Investors, a New York-based firm managing approximately $3.6 billion, will look at selling the company outright instead of a sale. The firm could use an exit, as it is raising its fifth fund.
Founded in 1983, CPG International makes trim, moldings, window and door casings, decking systems, as well as fabricated bathroom partition and locker systems for the residential, commercial and industrial building materials sectors. Its customers include building products distributors, universities, government entities, hospitals, prisons and restaurants, according to Capital IQ
AEA Investors bought the company, then called Compression Polymers Corp., in May 2005 from Whitney & Co. and Clearview Capital LLC for $358 million, according to Capital IQ. Since then, the company has completed at least two add-on acquisitions. In 2007, the company’s CEO, John Loyack, decided to leave the company “to pursue other interests,” according to a press release at the time. Eric Jungbluth, a former executive vice-president with HNI Corp., a publicly traded maker of office furniture and hearth products, replaced Loyack and still holds the position.
In May 2011, the company filed to go public. AEA Investors has not disclosed how many shares it plans to sell. Pamlico Capital, a Charlotte, N.C.-based private equity firm, is also listed as a selling shareholder.
Last month, Moody’s lowered the speculative grade liquidity rating on $280 million of company debt to SGL-3 from SGL-2, mostly because of tightening of covenants set to begin in the coming months. (Speculative grade liquidity ratings relate to a company’s ability to generate cash from internal resources, and the availability of external sources of committed financing). Covenants on the company’s term loan contain a series of step-downs starting September 30, when they tighten to 4.75x EBITDA from 5.75x EBITDA. The company’s total leverage at the time of Moody’s report was just less than 5x EBITDA.
“Weaker than anticipated EBITDA performance and less than previously anticipated debt reduction in 2011 have reduced our expectation for covenant head room,” the ratings agency said in the report.
Still, the ratings agency said it expects the company’s $65 million revolving credit facility will remain undrawn for the majority of 2012, and that free cash flow will be positive for the year. The agency affirmed CPG International’s B2 corporate family rating, in part because of “the company’s leading position in the niche synthetic building products market, successful management of challenging market conditions over recent years and adequate liquidity profile.”
AEA Investors is seeking $1.5 billion for its latest fund, AEA Investors Fund V, according to December 2011 regulatory filing. It raised the same amount for its previous fund, a 2006 vintage fund.
Brian Hoesterey, an AEA Investors managing director who helps manage the investment, did not return requests for comment.