Less than a year after buying Russell Investments, TA Associates and Reverence Capital Partners are getting back more than half their investment.
Russell is increasing its secured debt by $200 million to $847 million, Fitch Ratings said in a Feb. 9 note. Proceeds from the add-on loan will be used to pay a one-time dividend to Russell’s PE holders.
“Private equity ownership introduces the risk of more equity-oriented actions, as evidenced by these actions,” the ratings firm said.
The $200 million dividend is more than half what TA and Reverence invested in Russell. The PE firms announced their $1.15 billion buy of Russell in October 2015 but the transaction didn’t close until June 2016. London Stock Exchange Group was the seller.
The PE firms committed $350 million equity to the buy of Russell, according to proxy documents. TA ended up owning 66.7 percent of Russell, while Reverence has 33.3 percent, the documents said. This means TA invested $233.5 million and Reverence the rest.
The $1.15 billion deal includes $150 million of installment payments that Russell will start paying in December, the proxy documents said.
Moody’s said the “incremental” debt issuance would have a marginal impact on Russell’s credit profile. Russell’s debt-to-EBITDA multiple will rise to 6.5x from 6.2x with the deal, Moody’s said. Russell’s adjusted debt following the transaction will total $1.13 billion, which includes debt for operating leases and the installment payments, Moody’s said.
Russell, which had $258.1 billion of assets under management as of Dec. 31, provides investment management services.
TA, Boston, is a growth equity firm that invests in sectors including software, healthcare and financial services. TA’s last fund collected $5.3 billion in 2015, news reports say. The firm will take both minority and majority stakes. TA has invested in BATS, Ameritrade and BluePay.
Reverence, a New York investment firm, has invested in Victory Capital Management and Kabbage.
TA and Russell could not be reached for comment. Reverence declined comment.
Action Item: Contact Todd Crockett of TA Associates at +1 650-473-2227
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