* Evercore reaching out to potential buyers -sources
* Synagro suffered from reduced city spending, canceled
* Carlyle's infrastructure fund currently not showing a
By Greg Roumeliotis
Jan 8 The Carlyle Group LP has asked
Evercore Partners Inc to explore a sale of cash-strapped Synagro
Technologies Inc, the largest recycler of organic waste in the
United States, two people familiar with the matter said, as the
buyout firm tries to cut its losses on its first infrastructure
Carlyle's infrastructure fund borrowed heavily to take
Synagro private in 2007 in a $772 million deal, leaving it
financially vulnerable when municipalities cut spending on
wastewater treatment and other environmental projects in the
aftermath of the 2008 financial crisis.
It also lost two major contracts in New York City and
Detroit. Its Detroit contract was mired in a bribery scandal
that weighed on Houston, Texas-based Synagro's public image.
Synagro was saddled with over $500 million of debt, with a
$100 million credit facility due in April, Moody's Investors
Service Inc said in August. In December, Synagro said it had
clinched a waiver from its lenders for a breach of covenants in
Evercore is now reaching out to other companies in Synagro's
sector as well as private equity firms to establish whether
Carlyle could recoup some of its investment in a sale, the
If this effort is not successful, the company could be taken
over by the debt holders, they added, speaking on condition of
anonymity because the discussions are confidential.
Synagro did not immediately respond to a request for
comment. Carlyle and Evercore declined to comment.
Launched in 2006, Carlyle's $1.1 billion infrastructure fund
was valued at its investment cost as of the end of September,
representing a negative internal rate of return of 7 percent,
according to the latest data published by the Washington,
To be sure, the fund, which invests in assets such as toll
roads, airports and regulated utilities, still has time to turn
a profit. It has a term of 12 years with two one-year extensions
possible, according to one of its investors, the Policemen's
Annuity and Benefit Fund of Chicago.
But turning Synagro around appears more challenging given
its debt pile. Carlyle has had to plow in $500,000 in additional
equity to allow the company to meet its debt obligations and may
have to do so again, Standard & Poor's said in August.
The company's capital structure is highly leveraged, with
total adjusted debt to earnings before interest, tax,
depreciation and amortization of almost 10 times as of June 30,
Standard & Poor's said.
Synagro manages the organic waste that water and wastewater
treatment plants generate, serving more than 600 municipal and
industrial water and wastewater facilities throughout the U.S.
It had 12-month revenues of $318 million as of the end of June,
according to Moody's.