Main Street Capital has closed two transactions, including a new portfolio investment and the partial exit of an existing portfolio investment.
The new portfolio investment includes USD40.5m of invested capital in Quality Lease and Rental Holdings, the parent company of Quality Lease Service and Quality Lease Rental Service.
Main Street’s investment consists of USD38m in senior, secured term debt in Quality and a USD2.5m direct equity investment in Quality’s parent holding company. Founded in 1989, Quality is headquartered in El Campo, Texas and provides drill site services and equipment rentals to the upstream oil and gas industry. Main Street partnered with third party investors and certain members of Quality’s management team to support the acquisition of Quality.
Main Street also completed the partial exit of its equity investment in IRTH Holdings and its wholly owned subsidiary irth Solutions, a provider of asset management solutions to the utility and energy industries, as part of a majority recapitalisation of irth Solutions by a private equity investment group and irth Solution’s management team.
Main Street made its original investment in irth Solutions, which consisted of USD6m in first lien, secured debt and a USD0.9m direct equity investment, during December 2010 to support the acquisition of irth Solutions by the company’s management team and a group of private investors. As part of the recent transaction, Main Street received a cash distribution of USD0.5m prior to closing of the recapitalization and realised a gain of approximately USD0.8m on the sale of 27 per cent of its equity investment.
Main Street realised a cumulative internal rate of return of 123 per cent and a 5.0 times money invested return on the partial exit of its equity investment in irth Solutions. Main Street also elected to retain the remainder of its equity investment in irth Solutions through a newly formed entity in partnership with the company’s management team and new private equity investor.
Based upon the valuation used to complete the recent third-party equity investment and the related recapitalisation of irth Solutions, Main Street’s retained minority equity ownership interest has a fair value of approximately USD2.7m, representing an unrealised gain of approximately USD2.1m compared to the USD0.6m cost basis of Main Street’s retained equity investment. In addition, the USD3.6m remaining balance of Main Street’s first lien, secured debt investment was assumed by the newly formed entity and remains outstanding.
