LONDON Feb 4 Private equity firm Apax's
acquisition of a 50.1 percent stake in classified advertising
publisher Trader Media is backed with a 358 million pound
($584.69 million) subordinated loan from a Goldman Sachs fund,
banking sources said.
The acquisition takes Apax's ownership of Trader Media,
the owner of the Auto Trader car sales website, to 100 percent.
It paid Guardian Media Group around 600 million pounds, valuing
the whole company at 1.75 billion pounds.
A 358 million pound payment-in-kind (PIK) toggle, that will
sit at a holding company level, funded the acquisition. It was
underwritten by Goldman Sachs and privately placed with a
Goldman Sachs mezzanine fund.
Goldman Sachs was not immediately available to comment.
The PIK toggle note is one of the largest of its kind
following a 350 million pound PIK toggle for British motoring
services firm the AA.
PIK toggles are risky instruments because of their deep
subordination and low recovery rates in the event of a borrower
default. They have seen a comeback in Europe as cash rich
investors look for higher yielding debt following a dearth of
new deals in 2013. A PIK toggle typically requires borrowers to
pay interest in cash only if their business is performing well.
At the same time, lenders to Trader Media have been asked to
approve amendments to the company's existing debt. JP Morgan is
running the process.
Apax bought a 49.9 percent stake of Trader Media from GMG in
2007, backed with an 835 million pound leveraged loan. In 2011
the owners raised an extra 150 million pound loan to take a
dividend from the company.
Existing lenders are being asked to allow for an increase in
Trader Media's leverage. The holdco PIK toggle takes leverage in
the company to 7 times, higher than the 6 times currently
allowed on a guaranteed basis under existing documentation.
The amendment will also put in place an extra interest
margin ratchet which means lenders will be paid an extra 25
basis points, so its term loan B2 will now pay 425 bps and its
term loan B3 will now pay 525 bps, if leverage exceeds 5.5
times. Lenders have until February 5 to agree to the amendment.
Existing lenders have also been offered a chance to extend
their debt to 2017 from 2015, if they didn't already do so
during a previous extension request in 2011 at the time the
dividend was taken. Lenders have until February 18 to extend.
($1 = 0.6123 British pounds)
(Additional reporting by Robert Smith; Editing by Christopher