Tuesday, September 8, 2015

Will $100 Million Load Shutter Getty?

The Carlyle Group wants to load Getty Images with another $100 million in debt.  The stated rationale is to invest in new product/service lines.  Getty Images debt had been on the decline prior to Carlyle shopping $100 million more.

Carlyle has $62.5 billion in dry powder.  If the new product/service line thesis made sense wouldn't Carlyle use equity to fund it?  The greed and leverage boys don't put good money after bad.  They know how to squeeze the last bit of cash out of declining affiliates.  Does Getty Images fit this profile?  Bloomberg reported:

The new debt, whether structured as loans or bonds, would rank above the company’s $550 million of unsecured notes. Those securities have lost 5.1 cents to trade at about 35.8 cents on the dollar since Aug. 12.

The new debt could remove the seniority of Getty’s existing top-ranked $1.9 billion of loans, the people said. Getty could rank the new debt either above or at the same level as the existing loans, depending on how it uses provisions in the credit agreement and adds additional assets to secure the loans.

Prices of the loans have fallen nearly 6.6 cents since the announcement to 62.8 cents on the dollar, according to data compiled by Bloomberg. They had traded above 90 cents as recently as February.