Just seven months after completing their $6.9 billion acquisition of BMC Software, the sponsors are getting more than half of their investment back in the company even with revenue and EBITDA down year over year.
BMC Software on April 8 launched $750 million in PIK toggle notes earmarked to pay a dividend to its investors, according to IFR, a Thomson Reuters company. BMC Software, which issued the debt through Boxer Parent Co, boosted the size of the deal from the original $500 million proposed, IFR said.
News of the dividend caused Moody’s Investors Service to downgrade BMC Software’s corporate family rating to B3 from B2 and the probability of default to B3-PD from B2-PD. Obligations with a B rating are considered speculative and are subject to a high credit risk, Moody’s said.
In September, an investor group led by Bain Capital and Golden Gate completed a $6.9 billion buy of BMC Software. The buyout firms agreed to commit $1.25 billion of equity and combined it with $1.4 billion in cash from BMC Software’s balance sheet to help fund the buyout, peHUB has reported. Other investors include GIC Special Investments Pte Ltd, Insight Venture Partners and Elliot Associates.
The current dividend cuts the sponsors’ equity in BMC Software to about 7 percent of capitalization, which is down from an already low 17 percent, Moody’s said. BMC Software is in the midst of a restructuring, with revenues and EBITDA down year over year, Moody’s said.
Houston-based BMC Software, which provides IT management software tools, produced $2.1 billion in revenues for the 12 months ended December 31, Moody’s said.
BMC Software isn’t the first company to issue a relatively speedy dividend to its private equity owners. In October 2012, TransUnion announced plans to issue $400 million of PIK toggle notes that were used to pay out a dividend to its shareholders. The dividend came just eight months after Advent International and GS Capital closed their $3 billion acquisition of TransUnion.
Platinum Equity also waited just weeks after buying Volvo Rents before it recouped some of its investment. The firm, led by Tom Gores, closed its $1.1 billion buy of Volvo Rents on February 3 and changed the company’s name to Blue Line Rental. Later that month, Blue Line Rental issued $250 million in debt (also PIK toggle notes) that it earmarked to pay a special dividend.
Golden Gate and Insight Venture Partners declined comment. Executives from BMC Software, Bain Capital, GIC Special Investments and Elliot Associates could not immediately be reached for comment.
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