An aggressive financing package from adviser Lehman Brothers propelled GTCR Golder Rauner's $800 million cash bid for TSI Telecommunication Services past other competitors. GTCR principal David Donnini confirmed Lehman bid aggressively, but could not comment on the other firms' approaches. Sources familiar with the discussions said Lehman was very aggressive in stepping up with the money and allowing for generous leverage ratios--a step that set it apart from competing bids. "The bids [for TSI] were due a couple of weeks after Sept. 11 when the market was volatile and Lehman stepped up when not every other institution was willing to provide to the other sponsors," one source added.
Lehman will now see if it can get other lenders to be as bold. The firm is currently looking for co-agents to fill out the higher levels, and general syndication is slated for after New Year. A banker at a rival firm said the market might not be receptive to such an aggressive structure. Pricing could not be ascertained. Officials at Lehman Brothers did not return calls.
Private equity firms have complained this year that banks are unwilling to provide the leverage to complete buyouts as they work through bad loans (LMW, 10/21). Average debt multiples for leverage loans are now at 3.7 times, with the bank debt to EBIDTA ratio 1.8 times, according to PMD numbers. This compares to 5.3 times and 3.5 times in 1998 respectively. Donnini declined comment on the debt to EBIDTA ratios or the structure of the deal.
Donnini said Lehman was chosen by GTCR partly for the strong commitment, but also the relationship with Ed Evans, the president and chief operating officer of Dobson Communications, who is set to become the ceo of TSI. "GTCR talked to a handful of lenders, but Lehman was a major investment banking partner of Dobson and the bankers knew Evans well, were comfortable with him and with GTCR's expertise in the transaction processing area," said Donnini. Lehman also advised GTCR on the deal. One banker said First Union worked with Providence Equity Partners and Goldman Sachs and Deutsche Bank are rumored to have worked with other private equity firms that were competing for TSI. Goldman did not return calls. A Wachovia Securities spokeswoman and a Deutsche Bank spokesman declined comment.
Commenting on prospects for the deal, Donnini said TSI is a transaction processing company that provides services to the wireless companies, differentiating TSI from the telecom names. The company is the largest wireless technical interoperability provider and is very profitable, he added.
The financing will be $300 million senior bank debt, including an institutional tranche, and a $245 million bridge-to-bond offering in January, according to a banker following the deal. There is some risk from technological advances, but the company is very different to its clients, he added. "It is not like building a network and waiting. The company exists today with good cash-flow, has made profits and has a good story and is one to watch," he said.