Some think all the recaps means there’s a bubble in the high yield market while others believe PE firms are being smart about the payouts they’re getting. There have been several dividend recaps recently, including HCA’s plans to pay a $2 billion dividend to its shareholders (KKR and Bain Capital). Dunkin’ Brands is also raising $2 billion to fund a $500 million dividend to its PE backers (Bain, Carlyle and Thomas H. Lee).
Still, not all deals gets done. Consider Burlington Coat Factory, which is owned by Bain Capital. Burlington was planning to raise $1.5 billion in new debt, which included $500 million in notes and a $1 billion term loan. About $300 million was expected to go to Bain via dividend.
Burlington on Friday pulled the the $1.5 billion debt offering because of the high interest rate it was being charged, according to Thomson Reuters Loan Pricing Corp.
Bain acquired Burlington Coat Factory, which sells coats and women’s sportswear, in 2006 for $2.06 billion.
Another deal that didn’t get done? In October, SK Capital pulled the massive $922 million dividend it planned to take from portfolio company Ascend Materials. But that was a totally different situation. SK Capital bought Ascend in March 2009 for roughly $50 million cash and, due to tax issues, wanted to take three years worth of dividends at one time. Ascend was in the market for an $800 million term loan to support the $922 million dividend. However, the the Ascend loan package struggled in the market and was pulled after insufficient demand.