Brookfield Corp. is seeking a loan of A$750 million (US$525 million) for La Trobe Financial Corp PTY., an Australian non-bank lender, to fund a payout to investors and refinance existing debt, according to people familiar with the matter.
Loan Structure and Terms
The deal is split into a A$700 million five-year loan and a A$50 million revolving credit facility, the people said, asking not to be identified discussing private matters. Morgan Stanley and UBS are arranging the deal, which is structured as a so-called covenant-lite term loan B, giving the company more flexibility with less oversight, the people said. The financing pays an interest margin of 475 basis points over the benchmark Bank Bill Swap Yield, or BBSY, they added.
Dividend Recapitalization Trend
A dividend recapitalization, where sponsors increase borrowings of a portfolio company to fund a payout, is becoming a common route in private equity to meet return targets when a sale or an initial public offering is difficult. The deal is the latest in a string of global transactions as buyout firms face continuing pressure to return money to investors. In the Asia-Pacific region, managers such as Warburg Pincus LLC, Navis Capital Partners Ltd and CVC Capital Partners PLC have embarked on similar financings.
Earlier Minority Stake Sale
Earlier this year, Brookfield sold a minority stake in La Trobe Financial to Abu Dhabi’s Axight Capital Ltd., a deal that valued the Australian manager at US$2.1 billion. The sale was concluded after La Trobe suffered outflows last year when the Australian Securities and Investments Commission issued temporary bans on its Australian and United States credit funds. Separately, the Canadian manager was hit with a massive A$2 billion loss in Healthscope Ltd., a private hospital operator currently in administration.
A representative for Brookfield declined to comment. The Australian Financial Review earlier reported on the loan size and lead managers.
