Charterhouse to reap £500m on Saga refinancing

Charterhouse is set to return £500 million to shareholders with a refinancing carried out by Merrill Lynch less than two years after acquiring the over-50s insurance and leisure group.

Charterhouse, a UK buyout firm, is to carry out a £500 million (€735 million) refinancing of portfolio company Saga, a UK business selling travel, leisure and financial services to the over 50s.
According to the Mail on Sunday, a UK weekly newspaper, Charterthouse will recoup its entire equity investment in Saga with a refinancing carried out by investment bank Merrill Lynch.
Saga was acquired from the De Haan family for £1.35 billion in 2004. According to the Mail, the transaction involved approximately £500 million of equity and £880 million of debt provided by Merrill Lynch, HBoS and Lehman Brothers.
Charterhouse was also reported to be considering a £2 billion flotation.

The move follows a report from ratings agency Standard & Poor’s last week which warned that the private equity industry is undermining the credit ratings of portfolio companies through excessive and premature refinancings. According to a report, there were 63 bank loan refinancings totalling $24.1 billion in bank debt in the first five months of this year.

Recent fast refinancings include CVC Capital Partners, Merrill Lynch Private Equity and Texas Pacific Group returning approximately £1.3 billion from two refinancings of UK department store Debenhams after buying the business in May 2004. Debenhams was then returned to the London Stock Exchange in May of this year with a £1.675 billion market capitalisation. In July, Bridgepoint returned £101 million from a refinancing of Safestore, a UK storage business acquired in September 2003 for £39.8 million.

Charterhouse beat off competition from Candover, JPMorgan Partners, HgCapital, Cinven and Apax Partners to acquire Saga in October 2004. Saga founder and chairman at the time of the take-private, Roger de Haan, is believed to have made approximately £1.1 billion on the sale.