Compass Diversified Holdings and Compass Group Diversified Holdings LLC (CODI) reported a capital raise of $290 million in gross proceeds from its previously announced capital markets activity, consisting of approximately $88 million from the issuance of new common equity and $202 million from its senior unsecured notes offering, before deducting underwriting discounts and commissions and other offering expenses.
These transactions further enhance CODI’s financial profile, bolstering its already strong liquidity position as reported in its Q1 2020 earnings report. CODI used the net proceeds from the common share offering and the sale of the senior unsecured notes due 2026 to repay the $200 million outstanding balance on the company’s existing revolving credit facility, and the remaining $90 million of cash provides the company with additional liquidity, which can be used opportunistically to pursue future acquisitions and for general corporate purposes.
Including proceeds from this strategic capital raise, cash and cash equivalents on the company’s balance sheet, and availability on the company’s revolving credit facility with the ability to upsize by $250 million, CODI has approximately $1 billion of total liquidity available to opportunistically pursue future acquisitions.
CODI closed its public offering of 5,000,000 common shares at a price to the public of $17.60 per share and has granted the underwriters a 30-day option to purchase an additional 750,000 common shares.
Additionally, CODI completed its previously announced private add-on offering of $200 million of the Additional Notes at an issue price of 101.000%, plus accrued interest from May 1, 2020 through the closing date. The Additional Notes were issued under the indenture dated as of April 18, 2018 and will mature on May 1, 2026. Interest will accrue on the Additional Notes from May 1, 2020, and the first interest payment date will be November 1, 2020.
On May 5, 2020, Moody’s Investors Service affirmed CODI’s Corporate Family Rating at Ba3 and Probability of Default Rating at Ba3-PD. Moody’s also upgraded the senior secured revolving credit facility due 2023 rating to Ba1 from Ba2, the senior unsecured notes due 2026 rating to B1 from B2 and assigned a B1 rating to the proposed $200 million add-on senior unsecured notes due 2026.
“Our permanent capital structure has always been a unique competitive advantage, and this capital raise underscores our ability to tap into the capital markets efficiently and further positions CODI to execute on compelling opportunities in an unprecedented environment,” said Elias Sabo, CEO of Compass Diversified Holdings. “The enthusiastic response to our offerings in these conditions speaks volumes about the confidence in our team and our ability to prudently identify and invest in leading middle-market businesses for the long-term.”
Sabo continued, “While the full economic impact of the global response to COVID-19 is yet to be seen, there will undoubtedly be new opportunities in the coming months to selectively partner with management teams that can benefit from our deep sector knowledge, operational expertise, and permanent capital base as they manage through the near-term uncertainty and position themselves for years to come. This capital raise gives us meaningful financial flexibility and we look forward to putting this money to work as the current dislocation begins to settle.”