SK Capital Partners has pulled the massive $922 million dividend it planned to take from portfolio company Ascend Materials.
Jack Norris, an SK Capital managing director, says there was sufficient demand for the deal, but “we didn’t think it was appropriate for us.”
peHUB reported last week that SK Capital was wavering on whether to take the dividend. Ascend was in the market in September for an $800 million term loan to support the $922 million dividend. SK Capital bought Ascend in March 2009 for roughly $50 million cash and, due to tax issues, wanted to take three years worth of dividends at one time.
Morgan Stanley, last week, reduced the planned $800 million term loan for Ascend to $500 million, causing some to think that the dividend had been slashed by half. Morgan was leading the sale of the loan. Barry Siadat, SK’s co-founder and a managing director, told peHUB at the time that Morgan had exceeded the $500 million but that SK was undecided on whether to take the dividend.
Norris says the private investment firm killed the dividend, because terms of the loan were too expensive. “We thought it was not a good fit for us and what we would like to do,” he says.
SK Capital needs more time to demonstrate the sustainability of Ascend’s business performance to obtain the appropriate leverage, rate and terms, Norris wrote in an e-mail Thursday.
SK Capital, with offices in New York and Boca Raton, Fla., is a private investment firm. Houston-based Ascend makes a tough, heat-resistant nylon used in automobile production and construction materials. The company, which had negative EBITDA at the time of its sale, is expected to produce $360 million EBITDA this year, Siadat said.
For now, SK Capital will continue to “successfully operating the business,” Norris says.
A dividend may still be in SK’s future. “Next year, we don’t know exactly when, we will explore whether a third party term loan makes sense for us,” Norris says.
UPDATE: Standard & Poor’s LCD said that the Ascend loan package struggled in the market. “Unofficial guidance on the term loan in the mid-L+600s gave way to official talk at L+800, with a 2% LIBOR floor and a 97 offer price a week after the deal was launched,” LCD said.