KKR to make significant investment in Coty Inc, Brookfield launches $5bn retail rescue effort, Life under quarantine with Soundcore’s Jarrett Turner

PE firms rush to rescue retail with KKR investing in beauty brand Coty and Brookfield launching a "retail revitalization" program.

Happy Monday! Hope all is well with you and yours.
Capital: It’s retail rescue day! We’ve been talking about ways sponsor-backed companies are trying to attract additional capital to help them bridge the coronavirus downturn.

Endeavor Group Inc, backed by Silver Lake, secured a $260 million term loan to help get it through this lock down period, with the company’s revenue down about 70 percent, Wall Street Journal reported.

JPMorgan Chase & Co is lead arranger on the loan, which has an 11 percent interest rate. Oaktree Capital will take the largest piece of the loan, WSJ said.

Endeavor is an entertainment company that owns a talent agency, event hospitality business and 51 percent of Ultimate Fighting Championship. UFC featured some live fights on Saturday without an audience (and members of each fighters’ teams wearing masks).

Talent agency Creative Artists Agency also is struggling in the downturn with falling revenues and a heavy debt load. S&P downgraded CAA’s credit rating last week, though kept its credit outlook stable as a reflection that live sports and music will gradually return to pre-pandemic levels toward the end of 2020 and early 2021.

TPG earlier this year was attempting to move CAA out of its sixth fund in a deal that would likely total more than $1 billion. The process, brokered by Park Hill Group, would give investors in the fund the option to cash out of their exposure to the company, or roll their stakes into a special purpose vehicle created to house the company.

Speaking of rescue …

Brookfield Asset Management launched a “retail revitalization” program to help finance businesses facing short-term cash crunches, writes Kirk Falconer on Buyouts. Brookfield plans to deploy $5 billion to retailers impacted by the pandemic lockdown, which has led to closings of non-essential businesses.

The revitalization effort would make non-control investments in medium-sized retail businesses operating for less than two years with pre-pandemic revenue of $250 million or more.

The initiative, shared across Brookfield’s platforms, including private equity and real estate, will be funded from the firm’s balance sheets as well as private pools, Kirk writes. Brookfield may look to raise additional funding as opportunities arise, he writes.

Read the story here on Buyouts.

Top Scoops
Meanwhile, KKR agreed to make a significant investment in public beauty company Coty Inc that will allow the company to deleverage its balance sheet. Coty will carve out its Wella brand into a standalone company into which KKR will take a 60 percent stake, with Coty retaining a 40 percent interest, for which KKR will pay about $3 billion.

KKR also will invest $1 billion through the sale of convertible preferred shares in the company. Coty will make an initial immediate $750 million sale of preferred shares with a 9 percent interest rate convertible into Coty shares at $6.24, or a 20 percent premium to the closing price on May 8 2020. KKR also will make an incremental $250 million investment in Coty convertible shares at the same coupon.

KKR is making the investment through its North American Fund XII and European Fund V.

“In the shadow of a global lockdown, we have also announced a comprehensive plan to reduce fixed costs by $700 million, which allows us to confirm our target to reach mid teens operating margins by FY23,” Coty COO and CFO Pierre-André Terisse said in a statement. Read our news brief here on PE Hub.

Even as deal activity is mostly on pause in the pandemic downturn, some GPs are managing to get deals done virtually. Soundcore Capital Partners, formed in 2015, was able to close a platform investment amid the pandemic over video and conference calling, Soundcore Co-Founder Jarrett Turner said.

“We probably have had anywhere between four and five calls a day with our lawyers, with the seller’s lawyers, with the seller … all-hands calls even late at night, it’s a California business, so we do it at 10 p.m. our time, 7 p.m. their time,” Turner told me. Read the full story here.

That’s it! Have a great Monday! Hit me up as always with tips n’ gossip, feedback or just tochat at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.

HOUSEKEEPING
Compensation survey: Calling all CFOs, directors of human resources and managing partners! We would like to invite you to take part in our 10th annual Holt MM&K Buyouts PE/VC compensation survey. All participants receive an executive summary of the final survey and a steep discount on the full report. All responses are kept confidential. Take the survey by clicking here or request an e-mail copy from Matt Cutler at matthew.c@peimedia.com.

Emerging managers and covid-19 – survey
If you’re an investor or a next generation fund manager, please take 15 minutes to fill out our fourth-annual emerging manager survey – you’ll get a complimentary copy for participating. If you’re an LP, click here to get to the survey. If you’re an emerging manager, click here.

Investors, has your faith in fledgling managers changed with the onset of a market downturn? Managers, have peer-group firms adjusted terms to keep LPs interested? Understanding the sentiment of your peer-group is essential for decision-making moving forward, so we’re asking:

LPs, how actively are you backing spin-out groups and other emerging managers? How do you make commitment decisions? What terms do you negotiate?

GPs, how have you adjusted for the market downturn? What terms do you offer to anchor investors? When do you plan to raise your next fund?

We know that accurate benchmarking data is valuable; last year’s Emerging Manager Report was downloaded by over 1,450 industry pros who benefited from this guide.

We value your privacy. We will not name your organization in the study or in any associated promotional material. The deadline to complete the survey is Friday, May 29, 2020. If you have any questions, send them to Research Editor Matt Cutler at matthew.c@peimedia.com.