After nearly five years, Leonard Green & Partners appears to have recouped all of its equity investment in Mister Car Wash.
The Tucson, Arizona, company is paying out another dividend to its shareholders, including Leonard Green. Mister Car Wash is refinancing more than $800 million in debt, LevFin Insights reported.
Proceeds from the deal, along with a $250 million loan, will be used to pay a $215 million distribution to shareholders, Moody’s said April 30.
The dividend will cause Mister Car Wash’s debt-to-Ebitda multiple to hit the “mid-8x range,” Moody’s said.
The credit-rating company downgraded Mister Car Wash’s corporate family rating rating to B3 and its probability of default to B3-PD. Obligations rated B are considered speculative and are subject to high credit risk, Moody’s said.
“While we view Mister Car Wash as a leading operator in the car-wash subsegment, today’s downgrade of the CFR and PDR reflects the company’s weak quantitative credit profile driven by its debt-financed acquisition strategy, which is now exacerbated by this substantial dividend to its sponsor/owners,” said Moody’s Vice President Charlie O’Shea.
The $215 million dividend follows a $213 million distribution in 2016, according to Moody’s.
Mister Car Wash operates 300 car washes and 32 express lubes in 21 states. The company produced more than $500 million in 2018 revenue.
Mister Car Wash is very acquisitive. So far this year, it has bought Patriot Carwash, Firehouse Soft Wash, Royal Car Care Center and Wash Rocket Car Wash, while opening locations in Tavares and Orlando, Florida.
With the second dividend, Green appears to have made back all its equity.
The Los Angeles PE firm acquired Mister Car Wash from ONCAP, the middle-market arm of Onex Corp, in July 2014. The deal was valued at $400 million to $500 million, Buyouts reported.
The acquisition of Mister Car Wash, which included $210 million in loans, was half debt and half equity, Moody’s said in 2014.
The investment came from Leonard Green’s sixth fund. Green Fund VI raised $6.25 billion in 2012. The firm’s seventh flagship raised $9.6 billion in 2016. The buyout shop was expected to begin marketing for its eighth flagship, which could target up to $10 billion, Buyouts reported in September.
Executives for Green and Mister Car Wash could not be reached for comment.
Action Item: Moody’s rating action: https://bit.ly/2Jh7rRw