Third Fund Struggling, MidOcean Plans $325M Recap Of Totes

A $325 million dividend recap of portfolio company Totes-Isotoner Corp. could be a welcome ray of sunshine for MidOcean Partners.

The New York buyout shop floated the transaction in June, according to sister service Thomson Reuters LPC, which tracks the loan market. Lead bank Credit Suisse is pricing the loan at 525 basis points spread over Libor, LPC reported.

Although MidOcean also invests in industries including business and financial services, media and industrial services, the firm historically has focused its greatest attention on consumer and leisure companies, a segment that has suffered through the Great Recession.

MidOcean took its majority stake in Totes-Isotoner through a recapitalization in January 2007, according to sister news site peHUB, which reported at the time that existing Totes shareholders Bruckmann, Rosser, Sherrill & Co. and company management retained a minority stake. Totes, a Cincinnati-based maker of umbrellas, gloves and other consumer products, expanded through an add-on acquisition in 2008, Northern Cap & Glove, according to the MidOcean Web site.

The $325 million recap would be a boost to MidOcean’s troubled Fund III, a $1.25 billion fund that closed in 2007 at the peak of the mid-decade economic boom. As of Sept. 30, according to the California Public Employees’ Retirement System, Fund III had generated a 0.6x investment multiple and an IRR of -20.6 percent. (CalPERS is not a direct investor in the fund, but keeps data from Sacramento Private Equity Partners, a fund family managed by Oak Hill Investment Management.)

One portfolio company, the struggling pizza chain Sbarro Inc., which MidOcean Partners acquired in January 2007, filed for bankruptcy protection in April and is reportedly in discussions with a strategic buyer, Buyouts reported in June.

Another holding, Penton Business Media Holdings Inc., which is backed by MidOcean and Wasserstein Partners LP, filed a prepackaged Chapter 11 in February 2010 to eliminate $270 million in debt. MidOcean and Wasserstein, acting as secondary lenders in the bankruptcy, agreed to invest as much as $51.2 million in the reorganization to position the publisher for a digital future.

MidOcean declined to comment for this story.