RLPC-Private equity owner of CPA to receive $285 mln dividend -sources
LONDON Nov 5 (Reuters) - The private equity owner of legal outsourcing company CPA is to receive a $285 million dividend less than two years after buying it, banking sources said on Tuesday, a sign of the firm's strong performance and favourable debt markets.
Cinven bought CPA in 2012 for around 950 million pounds ($1.52 billion) backed with a loan worth 435 million pounds. The deal was repriced later that year, allowing CPA to pay lower interest margins on its debt, according to Thomson Reuters LPC data.
With CPA trading well and positive debt market conditions, it is due to conduct a dividend recapitalisation - a process that sees more debt added to the existing borrowings and a dividend taken from it, the three sources said.
The $285 million dividend will be taken from a $1 billion refinancing, they added.
Cinven declined to comment and a CPA spokesman was not immediately available to comment.
"CPA has strong and predictable revenue streams with good profitability. It is highly cash generative," one of the sources said.
The refinancing will increase CPA's leverage to 6 times its annualised earnings before interest, taxes, depreciation and amortisation (EBITDA), the sources said. The current level is 3.9 times, and when Cinven bought the business it was 5.9 times, they said.
JP Morgan, Deutsche Bank and HSBC have been mandated to lead the new deal, with Bank of Ireland and Mizuho as co-arrangers. The deal will be showcased to investors at a bank meeting in London on Wednesday and commitments are due on Nov. 22, the sources said.
The refinancing will overhaul CPA's existing euro and sterling debt with dollars and euros, which will better align its debt to its revenue streams, the sources said.
In addition, CPA's mezzanine loan will be replaced with a cheaper second lien loan, they added.
The refinanced deal will also be free of covenants, two of the sources said, something European leveraged loan investors have traditionally shunned, as it offers no protection for lenders via financial tests and is more favourable for the borrower.
The refinancing will include a $365 million term loan B, paying 400 bps over Libor; a 250 million euro term loan B, paying 425 bps over Euribor; a $300 million second lien facility, paying 775 bps over Libor and a multi currency 50 million pound revolving credit facility, the sources said.
CPA was founded in Jersey in the Channel Islands in 1969. It employs around 1,700 people with customers in 200 jurisdictions. It provides services such as document review, contract management and litigation support, focused on intellectual property.
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