Friday, October 17, 2014

Carlyle to Siphon RAC Debt for Dividend

Bloomberg reported:

RAC Ltd.’s planned 1.2 billion-pound ($2 billion) loan is the biggest deal to be offered in the U.K. currency with limited lender protections, according to data compiled by Bloomberg

The roadside assistance company is seeking to raise the money through covenant-light loans, which don’t curb the ratio of debt the borrower can have compared with earnings and cash on its balance sheet and lack testing requirements on other performance metrics

RAC's PEU owner Carlyle Group plans to take a chunk of the $2 billion in dividends.
(T)he new debt will refinance existing facilities and pay a dividend to the private equity firm. 

Ka-ching!    RAC offers automotive breakdown protection.  Their paying customers need protection but not the company's debt holders.

Carlyle announced the sale of 50% of RAC a month ago.  It will now siphon off a significant portion of RAC's new $2 billion in debt.  Add management and deal fees and Carlyle is likely way beyond free shares. Let the PEU Times roll!