| NEW YORK, June 13
NEW YORK, June 13 Yankee Candle Co Inc said on
Thursday it had withdrawn a plan to borrow money in order to pay
a dividend to its private equity owner, a sign that a wave of
such lucrative deals may be coming to an end.
Private equity firms have in the last year taken advantage
of record-low interest rates in the United States by borrowing
through their portfolio companies and using the money to pay
dividends and return funds to their investors.
But fears that the Federal Reserve may start to cut down on
its bond purchasing program have led to debt deals becoming more
expensive in recent weeks - and some of them have been pulled
Many of the canceled or postponed deals, however, have been
refinancings aimed at funding a company's capital expenditures
or reducing the cost of its debt. Pulling a so-called dividend
recapitalization, aimed specifically at borrowing to also pay a
dividend, is likely to give other private equity firms pause.
Yankee Candle said in a statement on Thursday that it would
not be issuing $450 million in bonds and would not be pursuing a
new loan with banks, either, citing its inability to pay out its
existing creditors on previously agreed terms.
Moody's Investors Service Inc said this week that the bonds,
together with a proposed $950 million loan, would have been used
to refinance $842 million of Yankee Candle's debt, repay a $315
million debt obligation, and pay a $187 million dividend to its
owner, Madison Dearborn Partners LLC.
The proposed notes had been rated 'Caa1' by Moody's,
implying poor credit quality and more risk than many other
so-called 'junk' bonds.
Madison Dearborn tried unsuccessfully to sell Yankee Candle
earlier this year, according to people familiar with the matter.
Dividend recapitalizations often follow failed efforts by
private equity to sell a company.
A Madison Dearborn spokesman declined to comment, while a
Yankee Candle spokeswoman did not respond to a request for
Founded in 1969, Yankee Candle is the largest scented candle
maker in the United States. It sells items including scented
candles, home fragrance products, car fresheners and candle
Chicago-based Madison Dearborn acquired Yankee Candle in
2006 for $1.6 billion. The South Deerfield, Massachusetts-based
candle manufacturer had revenues of $852 million in the 12
months ended in March, according to Moody's.
Its slow earnings growth was cited by people familiar with
the matter as one of the reasons Madison Dearborn pulled its
sale last month after it failed to attract offers of over $2
billion, as it was hoping.