Brentwood Associates has completed dividend recapitalizations of two of its portfolio companies, K-Mac Holdings, Corp. and Paper Source. Brentwood’s ownership stake in both companies remains unchanged. Brentwood first invested in K-Mac in March 2011 and in Paper Source in June 2007.
“Great operating results at both K-Mac and Paper Source, coupled with strong credit markets, have allowed us to return a significant amount of proceeds to our investors, while continuing to maintain financial flexibility at both companies. We are excited about the continued growth prospects at both K-Mac and Paper Source,” said William Barnum, Jr., a Partner at Brentwood.
The K-Mac dividend, which provides a significant return on Brentwood’s original investment in the company, was financed through excess capacity under the company’s existing $252 million credit facility. Bank of America Merrill Lynch, Wells Fargo Bank, and SunTrust Robinson Humphrey were joint lead arrangers on the senior debt financing for K-Mac.
K-Mac is the largest Taco Bell franchisee in the country, operating 214 Taco Bell restaurants. K-Mac also operates 18 KFC and 6 Golden Corral restaurants. The company has a regional concentration in the South Central region of the U.S. with restaurants located in Arkansas, Indiana, Missouri, Oklahoma, Tennessee, Texas and Illinois. The company was founded in 1964 and is headquartered in Fort Smith, AR (www.kmaccorp.com).
The Paper Source dividend was financed through a new $50 million credit facility from Golub Capital, and provides a return that exceeds Brentwood’s original investment in the company.
Paper Source is a multi-channel retailer of paper products in distinctive colors and formats. The company sells specialty paper, invitations, stationery, envelopes, greeting cards, albums, crafting tools, gifts and novelties through its company-owned retail stores. Paper Source has 67 stores across 22 states and the District of Columbia. The company also has a direct-to-consumer business (catalog and e-commerce), and a wholesale business with over 1,000 accounts. The company is based in Chicago (www.paper-source.com).
These two transactions cap a highly active twelve months for Brentwood. During this time, Brentwood completed three new portfolio investments, including Sundance Holdings Group, Soft Surroundings, and The Veggie Grill. Brentwood also completed the sale of five portfolio investments, including Ariat International and Chamilia from the firm’s fourth private equity-dedicated fund, and Array Marketing Group, Filson Holdings, and Pacific Island Restaurants from the firm’s third private equity-dedicated fund. Other activities included the sale of all of the Texas locations of Brentwood’s portfolio company Spectrum Athletic Clubs, and K-Mac’s add-on acquisition of No Limits, LLC, a Missouri-based Taco Bell franchisee that owns and operates 25 Taco Bell restaurants.
Brentwood Associates is a consumer-focused private equity investment firm with over $650 million of capital under management. Sectors of interest include branded consumer products; consumer and business services; direct marketing, including direct mail and e-commerce; education; health and wellness; restaurants; and specialty retail. The firm was founded in 1972 and is based in Los Angeles, CA (www.brentwood.com).
© 2013 PEPD • Private Equity’s Leading News Magazine • 5-14-13