A super-aggressive Payment-In-Kind toggle issued by BlueLine Rental this week could embolden more private equity firms to use the bond market to cash out of assets at breakneck speed, and bankers to underwrite leveraged buyouts with riskier terms.
Financial sponsor Platinum Equity has now recovered all the cash it stumped up to buy Volvo subsidiary BlueLine (formerly Volvo Rents) just two months ago, after using the proceeds from the USD252.5m bond to pay itself a dividend. According to analysts close to the situation, Platinum recovered more than $200 million in equity it paid as part of the $1.1 billion acquisition.
The speed Platinum was able to recoup the USD201m equity it paid as part of the USD1.1bn acquisition in December of Volvo Rents, since renamed BlueLine Rental, was what really grabbed the market's attention.
Investors usually want to see evidence that the business is performing under a new owner, but limited proof of that did not stand in their way when considering the BlueLine deal.
Investors said the deal is indicative of strong growth potential for the Shippensburg, PA.-based rental company.