Apollo Re-Constructs Deal for Building One –

Apollo Advisors, L.P. in late March completed a minority investment in Building One Services Corp., a publicly traded roll-up of maintenance service providers. The investment comes just three months after the New York-based group backed out of making a larger commitment to the company.

The firm invested $100 million in 7.5% junior subordinated notes due 2012. It can convert the notes to Building One stock at $22.50 per share-the same price Building One paid last month to buy back 55% of the outstanding stock in the company. At press time, the company’s stock is trading at $16.94 per share.

Building One can choose to pay Apollo the interest in either additional notes or cash, according to public records. Through the investment, Apollo will own about 18% of the company and will hold three of ten board seats. Partners at Apollo did not return calls.

It was only in February that Apollo had reached an agreement to pay $200 million in an $862 million deal to acquire 43% of the business. The firm had lined up the necessary financing and then asked for a concession that entailed 30 of the business owners who ran companies that had been rolled into Building One to sign five-year employment contracts. The firm gave Building One just 48 hours to get the concessions, and the company could not meet the agreement (BUYOUTS March 8, p. 4).

Building One-a roll-up strategy originally launched by former U.S. Office Products Chief Executive Jonathan Ledecky-has acquired about 50 janitorial, mechanical and electric services companies.

Now, some of the key members of Building One’s management team have agreed to extend their employment agreements for 12 more months, according to public records.

Since February, Building One has secured $350 million in high-yield financing and a $350 million revolving credit facility, both through syndicated loans led by BT Alex. Brown.

Apollo’s investment will help to fund Building One’s stock buyback and also will provide increased capital for growth, according to a company statement.