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Summit to collect windfall from Welltec

by David Holley | Published January 27, 2012 at 11:59 AM

Summit Partners and other shareholders of Danish oil and gas technology company Welltec International ApS are in line to receive $34.5 million in cash dividends as part of a $325 million debt refinancing, according to a source.

Welltec, based in Copenhagen, is issuing $325 million in senior secured notes, maturing 2019, that priced late Wednesday at 97.4 to a yield of 8.5%.

Welltec plans to repurchase $38.4 million shares of Class A and B stock from Summit. (The Boston private equity firm bought the company from then-sponsor Riverside Co. of New York in 2007.) The issuer will also buy back another $11 million shares from another stakeholder, Danish group Haregabgaard ApS, and certain employees. The total from the notes to fund the dividends and buybacks equates to $84 million, the source said.

The bulk of the $325 million in new debt will be used to pay down debt. At least $140 million of the proceeds will be used to pay off an existing credit facility, maturing in June 2014, held by DNB Markets of Oslo, the source said. Another $33.1 million is being spent to repay a mezzanine loan facility that matures in December 2016. About $48 million will be used for general corporate purposes. A $20 million revolver is included in the new facility.

Goldman, Sachs & Co. and Credit Suisse Group are joint bookrunners on the notes along with co-manager DNB Markets, according to the source.

Both loans were put in place in 2007 to fund the buyout by Summit, which did not reveal a purchase price nor the size of its equity. Riverside said it made a 9.9 times return on its investment in 2005, without disclosing the amount.

Founded in 1994, Welltec serves the oil and gas sector, offering a variety of both lightweight and heavy equipment used for anything from cleaning to drilling.

It had $45.1 million in cash and cash equivalents as of Sept. 31, 2011. At the time, its net debt-to-Ebitda was 3 times.

Moody's Investors Service rated the junk bonds at B1, while Standard & Poor's rated it BB-.

Summit Partners declined to comment.

Welltec is among the private equity-backed companies that have been able to tap the credit markets for debt-funded dividend recapitalizations. Arizona Chemical Co. is funding a payout of around $292 million to private equity owners American Securities LLC and Rhone Capital LLC through a $550 million term loan, launched in December. Others -- including Lightower Fiber Networks, Marshall Retail Group and Kronos Inc. -- have also paid sponsor dividends in recent weeks.

This week, Seattle software developer Attachmate Corp. joined the queue, launching a debt amendment and add-on financing to its first- and second-lien term loans that will enable its backers, Francisco Partners, Golden Gate Capital and Thoma Bravo LLC, to collect a cash payout.

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Tags: debt refinancing | Private equity | Summit Partners | Weltec International

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Summit to collect windfall from Welltec

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