Monomoy makes 1.5x its money with Katun recap

Monomoy Capital Partners, which is out fundraising, has made 1.5 times its money on Katun Corp through a recapitalization.

HSBC and Comvest Capital provided $52 million in financing to Katun as part of the recap, according to a statement. Katun used the proceeds to repay existing debt and issue a dividend to company shareholders, which includes company management and Monomoy.

The distribution returned all of Monomoy’s investment in the company and generated a  “substantial” profit for Katun’s shareholders, the statement said.

Katun was able to complete the recapitalization even though the credit markets “aren’t that great,” a source said. The company didn’t “push the envelope” on leverage and its business has performed well, the source said. Katun remains “conservatively capitalized” following the recap, and Monomoy continues to own 95 percent of the business, the statement said.

Monomoy’s investment in Katun dates back to September 2008. It’s unclear how much Monomoy invested at that time, but the deal was valued at less than $100 million, a source said. Minneapolis-based Katun supplies toner, drums and parts for imaging equipment like printers and copiers.

The dividend is the first Katun has produced since its sale to Monomoy.

The Katun investment came from Monomoy’s first fund, which raised $280 million in 2008. Monomoy’s second fund collected $400 million in 2011.

The PE firm is out raising its third pool, which has a $650 million target. Fund III collected $428 million as of December 30, Buyouts previously reported.

Monomoy expects to complete marketing for Fund III this year, the source said.

Performance data for Fund I wasn’t available. Fund II generated a 68.6 percent net IRR and a 2.7x investment multiple as of June 30, according to the California Public Employees’ Retirement System, an investor in the fund.

New York-based Monomoy targets lower-middle-market companies that are EBITDA-negative or under-performers or require a turnaround. It focuses on manufacturing, industrial, distribution and consumer companies.

Lampert Debt Advisors advised Katun and Monomoy on the recapitalization. Kirkland & Ellis LLP acted as Katun’s attorney.

Executives for Monomoy declined comment.

Action Item: To contact Monomoy call 212-699-4000.

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