Blackstone completes dividend recap of India's Mphasis

Blackstone agreed to buy a 60.48% stake in publicly traded Mphasis from Hewlett Packard Enterprise in April 2016, paying approximately $825 million. The GP made an open offer for an additional block of shares that would have taken its stake past 80%, but the response was minimal. Blackstone currently has an 86% interest in the vehicle it used to acquire the HPE position, with co-investor GIC holding 14%.

A $405 million syndicated loan was launched to support the deal, but Debtwire reported that it closed at $297 million because Blackstone did not acquire as many shares as planned. Approximately $267 million of the proceeds of the bond issue will be used to repay this debt, with Blackstone and GIC set to receive a further $200 million as a dividend. The five-year bonds have a coupon of 5.3%.

Amrish Baliga, head-financing at Deutsche Bank India, told The Economic Times that it was the largest PE-sponsor backed bond transaction ever completed out of India. Deutsche was joint global coordinator for the deal alongside Standard Chartered.

Debt refinancing is rare in India – as are buyouts – but not unprecedented in the IT outsourcing space, where companies have stable, recurring revenue from multinational clients and there is the potential for taking security over certain operating subsidiaries based outside India.

Last July, Hexaware Technologies issued $300 million in senior notes, with the majority of the proceeds used to repay a $235 million acquisition loan; there doesn’t appear to have been a dividend payment. A year earlier, the company amended and restated the original buyout loan of $185 million, increasing the facility to $250 million.

Mphasis offers business process outsourcing (BPO) and infrastructure services to companies worldwide in the banking, financial services, and insurance sectors. It employs more than 20,000 people in 16 countries, and generated revenue of INR60.7 billion ($942 million) for the 12 months ended March 2017, roughly on par with a year earlier. Net profit rose from INR6.86 billion to INR7.91 billion over the same period.

As part of the sale, HPE agreed to a five-year renewal of its master services agreement with Mphasis that will see it commit $990 million in revenue over the next five years, with three automatic renewals of two years each. 

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• Topics
• South Asia
• Technology
• Financing
• Buyouts
• India
• The Blackstone Group
• GIC Private
• Leveraged finance