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Turnaround Firm Already Making 6x On Auto Parts Co.

KPS Capital Partners has already generated 6x its invested capital in HHI Group Holdings LLC, an auto parts company that recently completed its seventh recapitalization under the turnaround shop’s ownership, a source close to the deal told Buyouts.

The latest recap, announced March 26, was funded by a combination of increasing the company’s term loan by $50 million, cash on hand and the company’s asset-based revolving credit facility, according to the firm. The proceeds funded a $70 million cash distribution to majority owner KPS Capita and other minority investors including MC Capital Inc.

The Royal Oak, Mich.-based company company, which is still 100 percent owned by KPS Capital and other investors, is now leveraged at less than 3x its EBITDA, according to the source. The source declined to provide the EBITDA.

When it comes to dividend recaps, KPS Capital is one of the more prolific sponsors. Around this time last year, HHI Group completed a $425 million recap which funded a $100 million cash payout to shareholders and, all in all, the company has distributed $418.8 to stockholders under KPS Capital, according to the firm.  In another example, the firm completed two recaps of adult incontinence product maker Attends Healthcare Inc. that included cash distributions of $35 million and $60 million, respectively, before finally selling the company and generating a total multiple of15x return on its invested Capital,

HHI Group highly engineered parts used in power train applications, as well as wheel bearings and engine timing drive systems, among other products. The company employs more than 3,000 across 15 manufacturing facilities in Arkansas, Illinois, Indiana, Michigan and Ohio, according to KPS Capital.

It’s unclear how much KPS Capital invested in the company. According to Capital IQ, KPS Capital bought the company, then called Jernberg Industries Inc., out of bankruptcy in September 2005.

Bernard Vaughan is a Senior Editor at Buyouts Magazine. Follow his tweets @BVaughanReuters.