Portfolio Company Staggers As CHS Preps Next Fund

Besides operating bowling alleys, the Mechanicsville, Va.-based company also manufactures bowling equipment such as scoring equipment and bowling pins, among other products. CHS Capital and Bruckmann Rosser Sherrill & Co. LLC bought the company for $250 million in early 2004. CHS Capital invested $74.6 million in the deal.

Bruckmann Rosser Sherrill only maintains a minimal stake these days after a series of dividends, according to executive Stephen Sherrill. CHS Capital announced an undisclosed distribution from the company after a June recapitalization on the company.

The company already went through a Chapter 11 bankruptcy in 2001 and has seen its number of bowling centers decline in recent years. More than 10 years ago, the company operated about 500 bowling centers, and today operates about 300, according to Bill Rochelle, a bankruptcy columnist for Bloomberg.

AMF Bowling has a $217 million first-lien term loan that matures in June of 2013 and an $80 million second lien term loan that matures in December 2013.

Analysts at Standard & Poor’s ratings agency are skeptical that the company will be able to refinance that debt and as such recently lowered the company’s corporate credit rating one notch to ‘CCC’ from ‘CCC+’. The company was able to amend its revolving credit facility to extend its maturity, but it only allows the company to use the revolver for letters of credit, according to S&P.

It’s bad timing for CHS Capital, formerly known as Code Hennessy & Simmons, which has been preparing to raise its sixth fund since November 2010, when a source close to the firm told Buyouts it likely would start raising in 2011. At that point, the firm still had about $250 million left to invest from its fifth fund, a $1.3 billion vehicle closed in 2005. In January 2012, the firm had not yet determined when the fund would launch or what it would target, according to the source. It’s not clear if things have changed since then.

The firm has reported some positive news in recent months. In February, portfolio company GSE Holdings, a specialty chemicals company, raised approximately $63 million when it went public at $9 per share, after initially hoping to price its stock at $13 to $15 a share; the company was trading up at $11.82 per share on May 14. The firm also sold at least one company, made one platform acquisition and did several add-ons to portfolio companies in 2011, according to a 2011 recap announcement the firm put out.

CHS Capital’s performance has been mixed. Fund II, a 1994 vintage, was a homerun, generating an investment multiple of 3.5x and an internal rate of return of 32.59 percent as of Sept. 30, 2011, according to the Washington State Investment Board. Fund III, a 1997 vintage fund, generated a 1.5x investment multiple and a 7.4 percent IRR, while Fund IV, a 1999 vintage fund, returned 1.7x invested capital and produced a 13.49 percent IRR. The 2005 Fund V by that date had so for generated a 1.3x investment multiple and a 6.86 percent IRR.

Executives at CHS Capital did not return requests seeking comment.