With all the fuss about AngelGate, I read something today that was startling.
Ascend Performance Materials is paying a $922 million dividend to owners SK Capital Partners, according our sister Web site, Buyoutsnews.com, (subscribers can see the story here), citing a report from Standard & Poor’s. SK Capital, a middle market PE firm, bought Ascend in April 2009 and injected roughly $50 million equity.
Total dividends paid to SK could reach $1.1 billion, which includes dividends already paid out and future ones contingent on certain events, the Sept. 22 report from S&P said.
How’s that for a great return?
To support the large dividend, Ascend is currently in the market with a $800 million term loan, according to according to Thomson Reuters Loan Pricing Corp.
Houston-based Ascend makes a tough and heat-resistant nylon used in automobile production and construction materials. Solutia sold Ascend in 2009 to SK Capital and received about $54 million. Ascend had 2008 revenue of about $1.8 billion, according to press reports from that time.
S&P has assigned Ascend a preliminary corporate credit rating of ‘B’ with a stable outlook. Ascend reported EBITDA, on a last 12 months basis, of $295 million, S&P says. The industrial nylon industry is highly cyclical and the ratings agency said it believes “ the proposed liquidity provides less than adequate downside protection.”
“It is large,” says one PE exec of the $922 million dividend SK Capital is to receive. However, the source says the numbers — SK Capital receiving a $922 million dividend on a $50 million investment — sound “out of whack unless there was a huge event.”
Another buyout exec said the debt markets are robust enough now to allow large dividend recaps such as these. “If those numbers are accurate then it’s a phenomenal return,” the source says. “It would be interesting to figure out what created so much value in such a short period of time. They could’ve bought very well given the climate last year.”
Officials for Ascend and SK Capital couldn’t be reached for comment.