September 11, 2013 / 3:53 PM / 4 years ago

RLPC-Charterhouse seeks dividend payout from Card Factory

LONDON, Sept 11 (Reuters) - British greetings card retailer Card Factory is seeking to raise 165 million pounds ($259.41 million) to pay a dividend to private equity owner Charterhouse instead of a stock market flotation or sale, banking sources said on Wednesday.

Charterhouse acquired Card Factory in 2010 backed with 185 million pounds of leveraged loans, according to Thomson Reuters LPC data.

It hired Goldman Sachs last year to consider exit options, hoping to achieve more than 600 to 700 million pounds via a sale or listing, equivalent to around eight times its approximate 82 million pounds of earnings before interest, tax, depreciation and amortisation, but offers fell short of this, banking sources said.

Charterhouse has now decided to raise an additional 165 million pound leveraged loan that will be used to make a special dividend payment. It is expected to revisit a listing or sale in the future, banking sources added.

No one at Charterhouse was immediately available to comment.

Raising debt for dividends, usually a feature of bull markets, has been on the increase in Europe in 2013 as a lack of merger deals has led sponsors to look at other ways of getting value out of their deals.

"For now, a dividend allows Charterhouse to get good value out of the company while still keeping it in good shape for a future listing or sale," one of the sources said.

The new term loan will sit in addition to its existing debt giving Card Factory debt to earnings of around 3.5 times. The company's debt to earnings in 2010 was around three times which was reduced to 0.8 in April of this year, the sources said.

Nomura is running the process and a bank meeting is due to take place in London on Thursday to showcase the new loan which will be sold to debt investors. The investors will have until a final deadline of September 30 to commit to the deal.

The 165 million pound, five-year term loan will pay between 500-525 basis points over Libor, the source said.

PWC acted as debt adviser on a consent process from Card Factory's existing banks to allow the dividend to take place, one of the sources added.

Card Factory opened its first store in Wakefield in 1997 and now has over 650 shops across the UK.

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