Sycamore told investors it boosted Staples earnings by $160 million since taking over the company, the people said. It will make annual coupon payments of almost 11% to buyers of the unsecured bonds, while the senior debt yields around 8%.Īltogether, the company now faces an additional $130 million annually in interest payments, according to people familiar with the matter. and UBS Group AG persuaded investors to buy the debt anyway-but Staples had to pay up. “These terms give the issuer far more flexibility than a dividend deal usually merits," said Scott Josefsberg, co-head of high yield at the credit research firm Covenant Review.Ī team of banks led by Goldman Sachs Group Inc.
Sycamore took $300 million of that equity back in January as part of a complex deal to acquire Essendant Inc., another office supplies distributor, and then soon started pitching the dividend recapitalization that would pay them another $1 billion.īut that proposal, missing typical investor protections, so alarmed some creditors that, on the day investors were told about the deal, the cost to insure Staples debt against default for five years saw its biggest increase since 2012, according to data provider CMA.
and Canadian retail operations into separate entities. Sycamore contributed $1.6 billion of equity and raised $4 billion of debt for the company’s more promising wholesale division, which sells office supplies to large corporations, according to people familiar with the matter. That kind of financial engineering had seemed to be the playbook after Sycamore bought Staples at a valuation of $6.9 billion, its biggest takeover ever.
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