Decorative Concepts, a home decor products company controlled by private equity firm Fenway Partners, tapped Deutsche Bank to lead a $100 million asset-based facility, after hiring Peter J. Solomon to solicit bids and advise on the financing arrangements. The deal also includes a $30 million senior subordinated debt offering with warrants. PJS acted as the advisor and sole placement agent.
Kelly Engel, associate director at PJS, said Fenway approached the investment bank to advise on the financing arrangements, which then sent out bids to various banks for the financing. PJS knew which were the asset-based lenders interested in the business, she added, and Deutsche Bank was selected because it has a lot of deal flow and expertise. An asset-based loan was selected to reflect market conditions and the sub-debt piece included because the market has become much tighter to lending, Engel explained. "The market has become more restrictive to loan multiples," she noted. The transaction was two times debt to EBIDTA and with the sub debt was just over three times debt to EBITDA. A few years ago banks were willing to lend four or five times, but now credit concerns are restricting the size of loans relative to cash flow. The financing is designed to consolidate the capital structure and will be used for growth purposes, explained Engel.
Fleet Capital is the syndication agent, and GE Capital the documentation agent. CIT Group, ORIX Financial Services, La Salle Bank and Heller Financial participated in the bank group. The investors in the sub debt piece with warrants were Gleacher Mezzanine, Canterbury Capital Partners and Golub Associates. The last loan was led by Fleet Bank in 1997 and totaled $60 million, with pricing of LIBOR plus 25/ 8%.