According to Reuters, private equity firm Advent International is considering refinancing debt in its British home appliance insurer Domestic & General and paying itself a dividend instead of selling the service plan business.
Whether this is as a result of the practices highlighted on BBC One’s “Your Money Their Tricks” show is unknown although we doubt that the unwanted publicity was welcome about the way that DAG’s Repair & Protect plans are sold that we know as Cover +1.
Rueters reports that after a number of potential buyers backed away from any deal that Advent is contemplating a dividend recapitalisation, a process that refinances a company’s debt and increases it to allow a payout, banking sources said on Friday.
Advent International took Domestic & General private for 524 million pounds in 2007 backed with 434 million pounds of debt, according to Thomson Reuters LPC data.
Advent then looked to sell the Domestic & General business earlier this year, hiring Goldman Sachs to accomplish that. The sale was was expected to fetch around 1 billion pounds.
Private equity firms Blackstone, CVC, Clayton Dubilier & Rice and Stone Point Capital made it through to the second round of bidding which was due in mid-July, but only CVC submitted its interest after the other three dropped out, bankers said, adding that CVC is keen to do the deal.
CVC, Blackstone and CD&R declined to comment. Advent and Stone Point were not immediately available to comment.
The threat of such a move can be useful in creating competitive tension, bankers said.
“Although Advent would like to sell the Domestic & General there is a price tag and if it isn’t reached then they should comfortably be able to hold on to it, refinance the debt, take a payout and sit on it for a while,” one of the bankers said.
Domestic & General provides extended warranty protection for domestic appliances, has operations in 11 countries, employs around 2,500 staff and services 15 million customers. Its turnover was 570 million pounds in 2012, according to its website.
