Termsheet: Bigger fish

Bregal Partners’ Scott Perekslis must really like seafood. The private equity firm’s managing partner and co-founder has been involved with American Seafoods in various capacities for almost 17 years, and now that his firm has taken an equity stake in it, he expects to hold on to the company for some time still – up to 10 years – he tells PDI.

When the company was on the brink of defaulting on its massive debt pile this summer, Perekslis’ firm, in tandem with other investors, swooped in with fresh equity and arranged a debt writedown and an $800 million refinancing led by Ares Capital Corporation. The deal – likely the 11-year-old BDC’s largest, according to ARCC chief executive Kipp deVeer – was syndicated among some 30 lenders.

The new financing pays down American Seafoods’ outstanding debt and followed a distressed exchange of 15 percent payment-in-kind (PIK) notes that took the company’s leverage down to 6.5x from about 9x. The Seattle-based company is one of the largest fish harvesters in the US.

While a portion of its woes were driven by depressed prices for some of the companys catch, Perekslis says its complex debt structure and over-levered balance sheet were the real problems.



Perekslis first started talking to American Seafoods management in 1998, when the company was looking for an exit from its Norwegian parent. Perekslis eventually bought the company in January 2000, when he was at Centre Partners, where he had been a senior partner since 1991. He went on to found Bregal in 2012.

Centre Partners exited its stake in American Seafoods to management, shareholders and some Native Alaskan groups in 2006, though Perekslis remained on the company’s board. He resigned from that position last year because as the company began the restructuring process to avoid a conflict of interest as he put on his investor hat again to work on some options with management. American Seafoods had at that point hired Blackstone to advise on the restructuring.

Perekslis also has longstanding relationships with Ares executives and has worked with them on other deals while at both Centre Partners and at Bregal.

It was partly this familiarity with American Seafoods and Ares Capital that brought Perekslis back to the company and this deal. As of the end of June, American Seafoods total debt stood at $906.8 million. That included $669 million of debt at the operating company level comprising an $80 million revolving credit facility, a $68 million term loan A, a $246 million term-loan B and $275 million 10.75 percent bonds.

To deal with its over-levered state, the HoldCo (American Seafoods Group) negotiated a 55 percent haircut on roughly $200 million of 15 percent PIK notes, while its senior creditors were paid back in full, Perekslis says.

S&P said the firm was likely to enter bankruptcy without some kind of write-down. Some 86 percent of the PIK note holders had agreed to the distressed exchange by June, according to the ratings agency. By the time the exchange offer was up on 18 August, $146.9 million of the notes had been exchanged for cash, while $39.2 million were exchanged for new units or warrants.

The new deal replaced the old HoldCo with American Seafoods Partners. Bregal Partners, along with Frank Dulcich, chief executive of Pacific Seafood Group, Chris Lischewski, chief executive of Bumble Bee Foods, and Amy Humphreys, former chief executive of Icicle Seafoods, injected fresh equity into the firm. Bregal now controls a large minority stake, alongside its current management.

The Ares-led $800 million package includes a $60 million revolving credit facility, a $540 million first lien term loan priced at 500bps over Libor and due August 2021, and a $200 million second lien term loan which pays a margin of Libor plus 900bps and matures in February 2022.

Sources tell PDI that Ares is holding a slice of all three lines. On a second quarter earnings call, deVeer said Ares would hold $100 million-$200 million and has projected that the fees earned would total $8 million-$9 million. He touted the transaction as evidence of Ares’ ongoing ability to execute large deals and make chunky fees, without its former Senior Secured Loan Program partner, GE Antares.

The facility was syndicated to 30 other lenders, the bulk of whom are alternative lenders or other BDCs with a couple of Nordic banks also joining.



One private debt executive offered a first lien piece says he turned it down on the basis of low pricing and high leverage.

Other critics of the deal claim it’s a risky transaction and that Ares’ quick action in pushing it through was motivated in part to prove that the firm can still lead large deals without GE’s support.

They also say Ares is likely to hold a bigger slice of the second lien tranche to juice returns. Whereas a number of alternative lenders are avoiding junior debt, arguing that the risks don’t justify the returns at this stage in the credit cycle.

When Perekslis was looking at financing options for restructuring the company, he said he evaluated two options: a broadly syndicated transaction involving banks and the public market or a fully private non-bank facility. In the latter case, he only considered Ares to lead the facility.

Because of the complexity of this project and the time in which it needed to get done, Perekslis thought he would be better served by working with Ares and pursuing the private non-bank financing. “Back in early July, we decided to focus exclusively on that track and just get it done,” he says.

He was also interested in working with a firm that “was putting up a substantial portion of the credit themselves and that helped bolster the story and facilitate strong execution and it ended up working very well.”

With Ares, Perekslis felt there was certainty of execution as well as the fast-track timeline needed, as the company’s outstanding debt was coming due. “We didn’t really have time to go around again if the first path didn’t work,” Perekslis says.



Perekslis’ re-entry into the company is still fresh, so future plans are still fluid. Bregal Partners’ normal hold period is about five years, though he says he can envision holding onto this stake for as much as seven to 10 years.

“I think we’ll look at a number of potential avenues for growth,” Perekslis says. “One is acquisitions. We could enter into other related fisheries, leveraging our operating experience managing fishing fleets and getting the products to market. Another area would be to evaluate the form of product that we make and use different product forms to enter a different market.”

Though for Perekslis the reduction and restructuring of the company’s debt is the main factor in sorting out the future of the firm. “The overall reduction in indebtedness is pretty meaningful with this transaction and it’s not just what we’ve seen at the operating company and its immediate parent, but there are other direct and indirect parents that all had leverage and all of that got cleaned up,” he says. 






By the numbers



American Seafoods Group outstanding
debt before restructuring


Haircut applied to around $200m of 15 percent PIK notes


Ares Capital-led credit facility

Libor plus 900bps

Pricing on the $200m second lien
tterm loan


Lenders in the new syndicate


New first lien term loan


Tenor of the first lien term loan


Leverage before PIK haircut