The Royal Bank of Scotland launched syndication of a $210 million bank deal for Oreck Corp. last Thursday that will pay a $60.5 million dividend to equity sponsor American Securities Capital Partners (ASCP) and refinance bank debt at lower rates. The new structure comprises a six-year, $20 million revolver and a seven-year, $190 million "B" loan, with pricing of LIBOR plus 3% on the B1/B+ credit. There is a 50 basis points upfront fee for the revolver. David Horing, managing director of ASCP, did not return calls and an RBS banker declined comment.
Leverage is 3.6 times through the all-senior structure. RBS is sole lead on the deal, but other banks may be brought in. RBS led $140 million of senior debt backing ASCP's leveraged buyout of Oreck in March 2003, but improved performance is enabling the vacuum-cleaner company to take out the dividend, a banker said. Oreck brings in more than $300 million of sales and more than $50 million a year in EBITDA. At the time of the buyout, EBITDA was in the mid $40 million range, he said. The existing bank debt is priced at LIBOR plus 4 1/2%.
According to Moody's, the company has high product concentration and there are expenditures related with developing and marketing new products. There is also relatively heavy reliance on media spending, high pro-forma leverage and relatively low cash flow coverage, Moody's adds. These risks are mitigated by the company's long history and strong brand name and its experienced management team. The company also introduced air purifiers a number of years ago with rapid growth in sales of this product in the past couple of years.