Jan 21, 2021 - Economy & Business

Bain Capital preps a very rapid recap

Illustration of a hundred dollar being built by construction vehicles. 

Illustration: Aïda Amer/Axios

Bain Capital is seeking to partially cash out of U.S. LBM Holdings, a Buffalo Grove, Ill.-based building products distributor that it bought just last month. It would be done via a $400 million dividend recap featuring PIK toggle bonds that are expected to price today.

Why it matters: Dividend recaps are private equity at its most rapacious, enriching sponsors at the expense of portfolio company balance sheets. But this one is somehow even more egregious.

  • Not only because of the bond structure, which could cause LBM to pay interest on its debt by assuming more debt, but also because Bain apparently believes it deserves the GDP of Micronesia for a whopping six weeks of work.

The bottom line: "US LBM is tapping an investor base ravenous for new debt, as the average junk yield dropped to an all-time low of 4.13% Tuesday. The market is closing in on setting a new record for January issuance, with borrowers selling debt for anything from refinancing to funding acquisitions," Bloomberg's Paula Seligson and Davide Scigliuzzo write.

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