Tightened Banking Regulation Impacts Brickman-ValleyCrest Deal; Transaction is Progressing as Expected

Tightened bank regulation apparently has impacted the financing of the pending of the largest landscape services companies in the United States Brickman Group – ValleyCrest merger.
Bank RegulationReuters is reporting that federal banking regulators are requiring banks to reduce the amount of loans they make to in connection with leveraged buyouts that raise the borrower’s debt levels above a certain level. The regulatory change has caused some banks that participated in the initial acquisition of The Brickman Group by KKR&Co. to not participate in the smaller additional financing in connection with the ValleyCrest merger. Morgan Stanley, Credit Suise Group AG and Goldman Sachs Group Inc. all participated in the December financing of the original Brickman deal. Morgan Stanley and Credit Suise had the lead roles. Those three banks have opted out of financing the ValleyCrest merger. Other banks that participated in the December transaction and some other banks will provide the additional financing, which is said to total $725 million. The financing is being led by Jefferies Group, LLC., which did not participate in the earlier deal.
Reuters reports that Moody’s Investor Service pegged the leverage of the KKR-Brickman deal at 6.8 times EBITDA (earnings before interest taxes, depreciation and amortization.) In many cases, leverage above 6.0 times EBITDA raises regulatory concern. Reutuers quotes unnamed sources suggesting projected synergies between Brickman and ValleyCrest could reduce the combined companies overall leverage below 6 times EBITDA.
The transaction is continuing to progress and is expected to close in mid-2014.

Here is a link to the Reuters report.

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