Credit Suisse First Boston and Wachovia Securities last week launched syndication of a $262 million facility for Caribbean Restaurants. Proceeds will be used to pay a $65.2 million dividend to sponsors Oak Hill Capital Partners and American Securities Capital Partners, repay existing debt and for general corporate purposes.
The facility comprises a $30 million revolver, $125 million "A" loan and $107 million second-lien term loan. The first lien is priced at LIBOR plus 3%, while the second lien carries a spread of LIBOR plus 5%. There is a 50 basis point commitment fee on the revolver. Pro forma total debt-to-EBITDA is 5.6 times. "This is the type of business that can handle this level of debt and deleverage over time," said Tyler Wolfram, a partner with Oak Hill. "We have proven we can deleverage. This is the same amount of leverage we put on the business when we acquired it--about five times."
"The business has performed well over the last couple of years. It continues to deleverage and generate free cash flow," Wolfram said. "The financing markets are attractive right now so it's an opportunistic time to refinance the capital structure and put in place lower cost capital," he added. Caribbean Restaurants has $155 million of existing senior debt from Oak Hill's LBO of the company in 1999. That debt was led by J.P. Morgan. "CSFB and Wachovia proposed a very attractive capital structure," Wolfram said. "They know the industry well and know the financing markets well."
Oak Hill owns 73% of the company, management owns 17% and American Securities owns 10%. Caribbean Restaurants has the exclusive franchise from Burger King Corp. to own and operate Burger King restaurants in Puerto Rico. The company operates 164 restaurants in Puerto Rico. American Securities officials did not return calls.