Equistone considers moving Sicame to continuation fund

Sicame generated EBITDA in the EUR 55m–EUR 60m range in 2021, the first two sources added.

In parallel, the business is looking to refinance its existing bank debt, with Lazard advising on the transaction, according to the first three sources. Both incumbent and new banks are interested in financing the refi, with leverage expected in the 4-5x range, the first two sources said.

"Given Sicame isn't a healthcare and tech business, the EBITDA margin is in the norm rather than stellar. But the company has a solid [performance], as the need for grid-related products and services is only expected to increase," pointed out the first source.

The rationale behind going down the route of a continuation-fund deal, rather than a sale, is that Sicame can yield further returns for Equistone, which has owned a majority stake in the business since 2016, the first two sources noted. However, the continuation vehicle is not the only option under consideration, the third source cautioned.

Transferring assets to continuation funds was first tested in the large-cap sector but has recently made inroads into the mid-market, as reported by Unquote's sister publication Debtwire. Traditionally sponsors used to transfer underperforming assets that needed more time to grow before being able to deliver desired returns. They then started using continuation funds also as a way to reinvest in the well-performing businesses in their portfolio, as reported.

If the continuation deal goes ahead, new minority investors, including the LPs of the newly created continuation fund, might invest in the business alongside Equistone, the first source added.

With the primary loan market temporarily stalling as the Russian invasion of Ukraine pushed term loans pricing up and reduced banks' appetite for underwriting, Sicame's prospective lenders are embarking on a debt price discovery journey. Given the financing does not need to be placed urgently, as it would be in the case of a LBO, lenders are waiting to see if pricing stabilises before proceeding with the underwrite, the first and second sources noted.

Additionally, Sicame has operations in Ukraine and the impact of the war on the business is still being assessed by lenders, according to the first source.

Sicame previously refinanced its debt in 2019, via a club deal, as reported.

Equistone became a minority shareholder in Sicame in December 2009. It then proceeded to acquire a majority stake in 1Q16, alongside the founding family, Crédit du Nord, other individual investors and the management team.

Founded in 1955, Sicame designs, manufactures and sells a complete range of core transmission and distribution network accessories, including mechanical and electrical connectors to help build or maintain electrical networks. The group has established a global market presence in 50 countries and has around 3,100 employees. The business generated a EUR 400m turnover and EUR 37.6m EBITDA in 2020, according to its website.

Equistone and Lazard declined to comment.

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