Blackstone Mulls New Mountain Capital Proposal to Back JDA Software
August 18 2016 - 3:49PM
Dow Jones News
By Amy Or
Blackstone Group LP is contemplating a proposal by New Mountain
Capital that could give it a minority stake in JDA Software Group
Inc., as talks to sell the supply-chain management software
provider to Honeywell International Inc. continue, said people
familiar with the situation.
New Mountain last week reached out to fellow New York firm
Blackstone, proposing a $570 million structured financing deal in
exchange for preferred stock and equity warrants in JDA that would
entitle the private-equity giant to a 40% stake in the company and
guarantee a return of 7.5%, one of the people said.
The person added the deal is contingent on the outcome of JDA's
negotiations with Honeywell, an industrial conglomerate that makes
products ranging from air conditioners and commercial boilers to
airplane-cockpit controls and industrial gloves. The Wall Street
Journal reported this week Honeywell is close to sealing a deal to
acquire JDA for about $3 billion, including debt.
Reuters previously reported that Honeywell was in talks with JDA
and later said Blackstone had offered a financing plan to JDA.
Blackstone, along with a number of other large private-equity
firms, including Carlyle Group LP and KKR & Co., already passed
on the opportunity to purchase the asset when New Mountain reached
out to them over the past few months regarding an outright sale of
the business, said people familiar with the situation.
In soliciting Blackstone as a potential investor in JDA, New
Mountain is actively exploring a number of options to address the
high levels of debt at the company.
Another of the people familiar with the deal said a
recapitalization would enable JDA to reduce its debt and save $70
million in interest expenses, and would provide it with additional
capital to fund research and development efforts.
This person said the financing plan is just one of several
options New Mountain is contemplating, which include remaining the
majority owner of JDA.
JDA has about $2 billion in outstanding debt, representing about
nine times its earnings before interest, taxes, depreciation and
amortization, said the people.
Credit-ratings firm Moody's Investors Service in March
downgraded the corporate family rating for JDA's parent, RP Crown
Parent LLC, to Caa1 from B3. Moody's said in the release that RP
Crown's debt level "may be unsustainable."
About $1.45 billion of JDA's first-lien term loan comes due in
December 2018, said the people. Although there is no risk of an
imminent covenant breach, said these people, it is typical for
auditors to look at a company's leverage levels six to nine months
ahead of a debt maturity to determine if the company is healthy
enough for a refinancing deal. This leaves a few more months for
JDA and its backer to make liquidity plans.
Write to Amy Or at amy.or@wsj.com
(END) Dow Jones Newswires
August 18, 2016 15:34 ET (19:34 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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