(Bloomberg) -- Blackstone Group Inc. is looking to reap the benefits from a surge in online dating in a global pandemic and a rebound in demand for risky leveraged loans as investors seek higher-yielding assets.
The private equity firm, which bought a majority stake in the owner of dating app Bumble last year when it was known as MagicLab, is now seeking a payout from a $200 million loan. The deal, along with cash on balance sheet, will fund a $285 million dividend to Blackstone, as well as other co-investors and shareholders, according to a note from Moody’s Investors Service.
Citigroup Inc., which is leading the deal, is sounding out investors at a spread of 3.25 to 3.50 percentage points over the London interbank offered rate, said people with knowledge of the matter who asked not to be identified discussing a private transaction. The debt is being offered with a 0.50% floor and a discounted price of 99 cents to 99.5 cents on the dollar, and follows a $575 million issue in January that was boosted in size twice with borrowing costs slashed.
A representative for Blackstone declined to comment. A representative for Bumble didn’t immediately respond to a request for comment.
The sale is the latest in a slew of dividend recapitalizations that have hit the leveraged loan market as companies take advantage of low borrowing costs fueled in part by liquidity-boosting policies by the Federal Reserve, as well as rising demand from yield-starved investors. About $12.6 billion of loans funding payouts to shareholders were launched in September, the most for any month in about six years, data compiled by Bloomberg show.
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Bumble’s deal is notable for its timing, coming so soon after Blackstone’s investment less than a year ago in a deal that valued the company at $3 billion. Yet the loan, rated B1, or four levels below investment grade by Moody’s, may be well-received by investors as online dating has boomed during the outbreak with in-person meetings harder to navigate, according to loan market participants.
Leverage, a key measure of debt to earnings, was also fairly modest at the time of the buyout as Blackstone put up $2.45 billion of equity to finance the acquisition, creating a sizable cushion before lenders have to take any losses should the company fail to perform. The incremental loan is being marketed at 3.9x, one of the people said, up from 2.4x currently.
“Bumble’s revenue growth trajectory was not significantly affected by coronavirus-related restrictions on social gatherings, and the business has exhibited strong sequential revenue growth in each month since April 2020,” Fitch Ratings analysts Zachary Getelman and Jack Kranefuss wrote in an Oct. 6 report.
Other dating app loans have performed well, which bodes well for the new offering. Bumble’s existing term loan is trading around 99 cents on the dollar, while Match.com’s loan is around the same level, according to Bloomberg data. Bumble is preparing for an initial public offering that could come early next year, Bloomberg recently reported, which would also be a positive to lenders if any of the proceeds are used to reduce debt.
Commitments on the loan are due Thursday, a day earlier than initially expected.
(Updates with timing of loan in last paragraph.)
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