Permira Debt Managers signs £32m deal with Paperchase

The investment specialist teamed up with Lloyds Banking Group to provide a £50m refinancing package.

Permira Debt Managers (PDM) has provided a £32 million (€44.9 million; $49.2 million) six-year term loan to UK stationery retailer Paperchase, the firm said.

The loan is part of a £50 million refinancing package to support Paperchase’s growth plans in the UK and internationally. PDM extended the loan from Permira Credit Solutions II, its direct lending fund.

UK bank Lloyds Banking Group has provided £18 million in capex, revolving credit and ancillary facilities.

Both debt investors were attracted to the company’s strong trading and future prospects, they said.

Paperchase will remain under the ownership of UK-based private equity firm Primary Capital and existing management led by chief executive Timothy Melgund.

The sponsor backed the management buyout of Paperchase in July 2010, paying £20 million-£30 million, according to press reports. Sales grew at the greetings-card retailer by 27 percent. This year, the owners explored selling the firm for a reported price tag of £150 million but withdrew from market after concluding that bids were too low.

In July 2015, Paperchase announced a 33 percent increase in profit for the year ended January 2015. EBITDA stood at £9.6 million and total sales at £128 million. Ecommerce sales jumped 42 percent in the year.

Dan Hatcher, investment director at PDM, said: “We have long admired Paperchase’s clear leadership in its market and its dedication to innovation and growth year after year. We are delighted to be part of that story with our European direct lending fund providing substantial growth capital to support the company’s ambitious plans.”

Melgund said: “We are delighted to have agreed this arrangement with two very well-known funders. The debt will enable us to further build on the momentum in the business and continue to deliver our ambitious growth plans.”

In the last 12 months, the company launched in Canada through department store chain Hudson’s Bay, and in the US through stationery retailer Staples. It also added 13 standalone UK stores bringing the total to 122. Another five are planned before the year end. It has further outlets in Ireland, the Netherlands, Denmark, France, Germany and the Middle East.

PDM declined to comment beyond the statement.