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Disaster restoration firm Servpro marketing $525M whole-biz deal

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Blackstone Group is pursuing a cash-out refinancing via whole business securitization for one of its recent franchisor acquisitions – Servpro, an operator of fire and water cleanup and restoration franchises in the U.S. and Canada

Blackstone will be marketing bonds backed by the fees and royalty payments from Servpro’s base of 1,050 franchisees in 1,719 locations.

The $525 million whole business securitization will raise proceeds from note sales to pay off existing debt, as well as potentially provide a dividend to Blackstone, according to a presale report from S&P Global Ratings.

Servpro Master Issuer LLC Series 2019-1 transaction includes a $45 million Class A-1 variable-funding note tranche and a $480 million Class A-2 offering, each with a preliminary BBB- rating from S&P. The Class A-2 notes have a pre-approved additional capacity of $30 million, according to S&P.

The deal will produce unusually high leverage for a franchisor, with the company’s debt-to-EBITDA ratio rising to 7.8x from 6.5x, according to a presale report from S&P Global Ratings. Even the total adjusted leverage of 7.1x if the excess capacity of the A-2 notes remains undrawn is above any other existing whole-business securitization rated by S&P.

Servpro, which had $2.5 billion in company-wide sales for the 12 months prior to June 30, has been operating 52 years with a cumulative annual growth rate of 10% since 2008 and positive same-store sales growth in that same time period, stated S&P’s report.

Barclays is the sole structuring advisor, and Goldman Sachs and RBC Capital Markets are joint bookrunners on the deal.

Servpro, based in Gallatin, Tenn., provides reconstruction and restoration services to residential and commercial customers recovering from disasters – including hurricanes, tornadoes, fires, flooding, and broken water pipes – which render “large-loss” event damage following. About 44% of the business is its residential restoration services line.

Blackstone and Servpro announced in March that Blackstone was acquiring a majority stake in the company from the founders, who remained “significant” shareholders in the business.

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Whole business securitization