February 1, 2018 / 4:28 PM / 5 months ago

LPC-Shareholders accrue €2bn of dividends from 3i's Action

LONDON, Feb 1 (Reuters) - Dutch discount retailer Action is set to pay €760m to shareholders, the fifth dividend to be dished out under private equity firm 3i’s ownership, banking sources said.

3i acquired Action in 2011 and since then approximately €2bn has been paid out in dividends to shareholders, around 9.0 times their original investment, sources said.

The latest €760m dividend payment is part of a wider €2.4bn leveraged loan financing that comprises a €2.285bn, seven-year term loan B and a €125m six-year revolving credit facility, the sources said.

The €2.285bn TLB will refinance an existing €1.6bn TLB, with the additional debt used for the dividend, alongside cash on balance sheet.

3i acquired Action in 2011 and took its first dividend in 2013 when Action raised a €275m add-on loan to refinance a vendor loan and pay a distribution. Action then paid a €285m dividend to shareholders in 2014 as part of a wider €840m recapitalisation, according to Thomson Reuters LPC.

There were two further dividends paid out in December and February of 2016, according to TRLPC.

“Action is one of those investments that just keeps on giving. There is still implied equity left so if 3i sell or IPO Action they would still have a return to realise, and if they don’t sell then they will just take another dividend,” a syndicate head said.

ABN AMRO, BNP Paribas, Deutsche Bank, ING, Natixis and Rabobank are leading the latest leveraged loan financing and investors have been asked to commit to the deal by February 13, following a bank meeting on Thursday.

The €2.285bn TLB is guided to pay 325bp-350bp over Euribor, with a 0% floor at 99.75 OID. The existing TLB pays 350bp over Euribor.

The new TLB is covenant-lite, removing a net leverage covenant in the existing covenant-loose term loan.

Pricing of the new €125m RCF is 325bp over Euribor and it is offered with a springing leverage covenant. The RCF has increased from an existing €75m.

The dividend recapitalisation will re-lever Action to 4.8 times Ebitda, from 3.0 times.

Despite a tricky sector where many retailers have suffered, Action has experienced rapid deleveraging, from 4.5 times at the time of its last recapitalisation in December 2016, driven by continued strong Ebitda growth and cash generation, sources said.

Action is Europe’s largest and best performing non-food discount retailer with net sales in FY16 of €2.7bn. Almost two-thirds of net sales are now generated outside of The Netherlands.

It operates nearly 1,100 stores across seven countries in Europe, employing over 40,000 people.

Editing by Christopher Mangham

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