A couple of shareholders opposed to an acquisition of Workflow Management by Perseus and The Renaissance Group are working to keep Workflow public by finding lenders for a refinancing. Workflow announced that it is selling itself to the private equity firms after considering alternatives to address upcoming credit facility maturities (LMW, 2/16).
The sale is not an acceptable alternative to some investors. "The company has refused to go and pursue a refinancing, so we have gone out on our own and found lenders interested in proposing a refinancing," said James Chadwick, a managing member of Pacific Coast Investment Partners, which owns 0.455 million shares in the company. "As we get these offers we send them over to the company so they are aware the shareholders disagree with the assertion that the company cannot be refinanced." Pacific has teamed up with Jonathan Ledecky, a private investor who owns approximately 1.33 million shares, to find alternative financing. Perseus and The Renaissance Group are acquiring Workflow for $4.87 per share, following an auction process. "We think the stock is substantially undervalued at this acquisition price," Chadwick said. Officials at Workflow and Perseus did not return calls. Officials at Renaissance could not be contacted.
Pacific Coast has made arrangements for a recapitalization consisting of $175 million of debt and $30 million in equity financing. LaSalle Business Credit and Silver Point Capital have made proposals to provide the debt financing. LaSalle would provide a $100 million revolver and an "A" loan of up to $15 million priced at LIBOR plus 3% or prime plus 1%. Silver Point would provide a $60 million "B" loan at LIBOR plus 8 3/4% or prime rate plus 6 1/4%. Officials at Silver Point declined comment.
Bank of America had proposed to arrange a new $115 million facility, but the proposal was withdrawn after B of A was threatened with a lawsuit, Chadwick said. In a letter sent to Cove Partners, which advised Pacific Coast and Ledecky in connection with identifying, structuring and proposing certain refinancing, B of A said: "The bank was threatened with a claim that the bank had accepted an agreement restricting the bank's ability to provide the proposed financing. Without acknowledging or refuting the merits of the claim, the bank has elected to withdraw the proposal." A B of A spokeswoman declined comment. It could not be determined who was making the claim against the bank.
Silver Point was also involved when B of A was at the table. The B of A facility would have comprised a revolver of up to $100 million and an "A" loan of up to $15 million. It would have been priced at LIBOR plus 3% or the prime rate plus 1%, for the first six months after closing, according to a Securities and Exchange Commission filing.
Workflow's facility had a requirement to pay $50 million of the "B" loan by the end of the last calendar year. In June, Workflow was talking to third parties to help deal with the approaching repayment date (6/30). The facility was later amended in August 2003 and the due date was extended to May 1 this year. The amendment also brought the maturity of the revolver and "A" loan to Aug. 1. Fleet Bank leads the facility with Bank One as syndication agent and Bank of America, Comerica Bank and Union Bank of California as co-agents. National City Bank, LaSalle Bank and Chevy Chase Bank are the other lenders on the deal.