December 13, 2017 / 8:45 PM / a year ago

LPC: Banks provide US$650m of loans for SMG buyout

NEW YORK, Dec 13 (Reuters) - US venue management firm SMG’s leveraged buyout by Canadian private equity firm Onex Corp will be backed by a US$650m loan package, according to two sources familiar with the matter.

The loans will include a US$55m revolving credit facility, a US$395m tranche with a first priority claim and a US$200m tranche with a second priority claim, the sources said.

Jefferies, Nomura and Macquarie Group are providing the financing. Jefferies and Nomura will lead the senior and junior loans, respectively.

SMG provides services including facility staffing and training, food and beverage, event booking, management and promotion, financial management and maintenance.

The company’s client roster spans stadiums, arenas, convention centers, theaters and recreational and equestrian facilities globally, including the Mercedes-Benz Superdome in New Orleans, NRG Stadium in Houston, Soldier Field in Chicago, Manchester Arena in the UK, Cobo Center in Detroit and Kodak Center for the Performing Arts in Rochester, New York.

Jefferies, Nomura and Macquarie declined to comment. Onex did not respond to requests for comment.

The transaction will bring leverage to five times through the senior loan and 7.5 times total, based on US$595m of funded debt and the company’s last 12 months’ Ebitda, or earnings before interest, taxes, depreciation and amortization, of roughly US$79m, the sources said.

The recurring revenues derived from the company’s contracts provide stable cash flows that support the deal’s lofty debt-to-Ebitda multiple, which is well above the six times limit US regulators outlined in their leveraged lending guidance in 2013 aimed at containing systemic risk. Non-regulated banks, including the arrangers of the SMG debt, are not held to the guidance.

Onex is paying around US$1bn before fees and expenses for Pennsylvania-based SMG and will contribute approximately US$440m in equity, one of the sources said.

The acquisition, announced on Monday, is expected to close in early 2018. (Reporting by Andrew Berlin; Editing By Jon Methven)

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