Just months after closing their $3 billion buy of TransUnion, Advent International and GS Capital are getting some of their money back.
TransUnion plans to issue $400 million of PIK toggle notes that will be used to pay out a dividend to shareholders, according to Moody’s Investors Service and Standard & Poor’s Ratings Services. Advent International and GS Capital completed their $3 billion buy of TransUnion on April 30. The PE firms invested about $1.1 billion equity in the TransUnion deal, according to SEC filings.
Suzanne Wingo, a Moody’s analyst, says the dividend will come to about $400 million, minus fees and expenses. Advent and GS Capital each own 49.5% of TransUnion, SEC filings say.
If the dividend closes, the PE firms will likely get back about 36% of their investment.
“This is one of the faster instances I’ve seen of a private equity firm taking a dividend,” Wingo says. “But we’ve seen a lot of dividends this fall for opportunistic reasons. The companies want to take advantage of the hot credit markets.”
Private equity firms are also preparing for the tax changes next year. Capital gains are expected to increase in January unless Congress takes action. “Private equity firms have an incentive to take a dividend out now while the capital gains tax is relatively low,” Wingo says.
Chicago-based TransUnion, a credit reporting company, generated about $1.1 billion in revenue for the 12 months ended June 30, Moody’s says. The outlook for TransUnion is stable, Moody’s says. S&P, meanwhile, revised its outlook on TransUnion to negative from stable. S&P expects pro forma leverage to remain above 6.5x for an extended period of time.
The $400 million debt-financed dividend raises TransUnion’s financial leverage (total debt/EBITDA) by about one turn, Wingo says. Moody’s expects TransUnion to generate at least $75 million of free cash flow over the next year. The company’s financial leverage will likely remain above 6x for the next 12 to 18 months, Moody’s says.
Advent declined comment. Officials for TransUnion and GS Capital could not be reached for comment.
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