U.S. venue management company SMG’s leveraged buyout by Canadian private equity firm Onex Corp will be backed by a US$650 million loan package, according to two sources familiar with the matter.
The loans will include a US$55 million revolving credit facility, a US$395 million tranche with a first priority claim, and a US$200 million tranche with a second priority claim, the sources said.
Jefferies, Nomura and Macquarie Group are providing the financing. Jefferies and Nomura will lead the senior and junior loans, respectively.
SMG provides services including facility staffing and training, food and beverage, event booking, management and promotion, financial management and maintenance.
The company’s client roster spans stadiums, arenas, convention centres, theatres and recreational and equestrian facilities globally, including the Mercedes-Benz Superdome in New Orleans, NRG Stadium in Houston, Soldier Field in Chicago, Manchester Arena in the U.K., Cobo Center in Detroit and Kodak Center for the Performing Arts in Rochester, New York.
Jefferies, Nomura and Macquarie declined to comment. Onex did not respond to requests for comment.
The transaction will bring leverage to five times through the senior loan and 7.5 times total, based on US$595 million of funded debt and the company’s last 12 months’ Ebitda, or earnings before interest, taxes, depreciation and amortization, of roughly US$79 million, the sources said.
The recurring revenues derived from the company’s contracts provide stable cash flows that support the deal’s lofty debt-to-Ebitda multiple, which is well above the six times limit U.S. regulators outlined in their leveraged lending guidance in 2013 aimed at containing systemic risk. Non-regulated banks, including the arrangers of the SMG debt, are not held to the guidance.
Onex is paying around US$1 billion before fees and expenses for West Conshohocken, Pennsylvania-based SMG and will contribute approximately US$440 million in equity, one of the sources said.
The acquisition, announced on Monday, is expected to close in early 2018.
Update: SMG was bought in 2007 by American Capital, which was bought earlier this year by Ares Capital Corp.
Onex is acquiring the company through Onex Partners IV, which raised US$5.7 billion in 2014. Onex Partners V closed last month at US$7.15 billion
(Reporting by Andrew Berlin; Editing By Jon Methven)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
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