Go Daddy to pay $350 mln dividend to KKR, Silver Lake, TCV

Go Daddy, the Internet domain registrar that is expected to go public later this year, is paying a dividend.

Go Daddy Operating Co. is securing a $1.1 billion loan that will be used to refinance existing debt and fund a onetime dividend, spokeswoman Karen Tillman said via email. The $350 million distribution will go to Go Daddy’s investors, which include Kohlberg Kravis Roberts & Co (KKR), Silver Lake and Technology Crossover Ventures (TCV).

News of the payout caused Moody’s Investors Service Inc to change Go Daddy’s ratings outlook to negative from stable. The debt-funded dividend will boost Go Daddy’s debt-to-EBITDA leverage by about 1.5x to nearly 7.0x, Moody’s said in a statement. However, a source said Go Daddy’s net debt will rise to 5.9x with the new loan.

Scottsdale, Arizona-based Go Daddy provides domain name registration, Web hosting and on-demand Internet services. The company produced $1.13 billion in revenue, Moody’s said. Go Daddy is the largest domain name registrar and generates predictable operating cash flow as a result of its good customer retention rates, Moody’s said.

“At the same time, the company operates in a highly competitive market for Web services, which is characterized by low barriers to entry, modest pricing power for basic products, and the low attach rates for add-on services that result in low average revenue per user (ARPU),” the ratings agency said.

The dividend will be the first that Go Daddy has issued since it was sold to KKR, Silver Lake and TCV in 2011 in a deal valued at $2.25 billion. The three firms, along with Go Daddy founder Bob Parsons, invested $1.3 billion equity as part of the deal. Go Daddy’s debt as of December 2011, once the sale closed, was $1.1 billion.

Go Daddy is expected to go public this year, Reuters reported in March. The company has hired Morgan Stanley and JPMorgan Chase to coordinate a stock sale that could come this year, The New York Times reported earlier this month.

Executives from KKR, Silver Lake and TCV could not be immediately reached for comment.

Editor’s note: This story was edited for content and clarity after it was published.

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