TriMark USA, Sacred Rights, and Expectations Investing

Welcome to the first Restructuring newsletter, 

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Today, we will learn more about: 

1. TriMark USA

2. Sacred Rights

3. Expectations Investing

TriMark USA

In 2017, Centerbridge Partners and Blackstone Tactical Opportunities Fund acquired TriMark USA, the largest restaurant supply and equipment company, in an LBO with $800M of term loans. TriMark was acquired from Warburg Pincus, which had grown the firm from $1B to over $1.8B, and had acquired Hockenbergs, RW Smith & Company, and Adams Burch. Jefferies, Barclays, Nomura and Citizens bank provided committed financing, and the loans offered lenders first and second recovery priority in the event of a default, split between a senior tranche worth $560M, and a junior tranche at $235M. The transaction was valued at $1.265B, implying a 10x EBITDA multiple. TriMark was an attractive acquisition due to its historically stable revenue growth, long-standing relationships with over 80,000 customers, and defensible market position. However, due to COVID-19 the foodservice equipment industry was negatively affected due to the industry's sensitivity to consumer demand and lockdown restraints. This led to TriMark USA facing a liquidity crisis and requiring additional financing to continue operations.

Thus, a committee was formed to work on determining any additional liquidity, and to explore potential pro-rata financing options. A new deal was reached which created a new class of lenders by amending the initial agreement. This deal included creditors, Ares and Oaktree Capital offering a $437.5M rescue package to Trimark in September 2020. This rescue package was split between a “New Money Tranche” of $120M super-priority “first out” debt which ranked ahead of existing First Lien Term Loans, and a “second-out” tranche of $307.5M of super-priority debt ranked ahead of existing term loans. The New Money Tranche provided $120M of additional liquidity to support the companies working capital to meet improving demand as the industry recovered from the pandemic, and the Second Out Tranche was used to purchase $307.5M of the original First Lien Term Loans at par. Before diving deeper into the transaction, it is important to understand some of the intricacies of the case.

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