Friday, June 19, 2015

Epi-junk?

Yowza.  Those who have followed this blog for a while know that I'm constantly aghast at the brazenness of the financial owners of legacy ERP companies - crafting exotic debt instruments, levering up the companies they acquire (and, in a sense, their customers) ... all the while, finding plenty of ways to pay themselves extravagant dividends.

Well, Bloomberg is reporting that Apax Partners, owners of Epicor, had to go hat in hand to Jefferies Group to "arrange" $2 billion in new borrowings - because two big banks "passed on managing the offering because of concerns it would run afoul of regulatory guidelines against excessive leverage":

The debt sale, along with a spinoff the company is doing at the same time, would push Epicor’s debt to 7.5 times a measure of its earnings, Moody’s Investors Service said in a statement on Monday in which it cut the company’s credit ratings. The leverage is beyond the ratio of 6 times earnings that U.S. banking regulators have said raises concern. Jefferies, a New York-based broker-dealer, falls outside the purview of banking regulators.

That's not all:

Moody’s lowered the credit ratings of Epicor to six levels below investment grade to B3 from B2, citing the “material increase” in leverage and the aggressive financial policies.
S&P changed its outlook on the company’s B rated debt to “negative,” according to a report Monday. The $300 million dividend follows the company’s approximately $380 million payment to Apax in June 2013, the report said.

Wow.  For a somewhat more light-hearted take on this topic, see the collection of Epicor-inspired POE-try here.

5 comments:

  1. Keith Deane finally bites the dust!!!!

    Anyone know what happened to him?

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  2. What is absolutely shocking to me is that underneath the BOhemoth that is Epicor, there are several packages running entirely on open source (LAMP) product. In addition, there's quite a robust community of developers, admins/IT and such those supporting the software at their respective companies. In fact, conversions are now complete for at least one software package, running fully now on RHEL, with another at about 40% converted and yet a third just underway. What Epicor has done is ignored these viable and thriving software packages, db's and OS's for the sake of continuance of Epicor 10 running M$ and SQL - their "flagship" product. If Apax sells, plenty fear these will be nixed in the process - so what are these hundreds upon hundreds of companies to do (representing hundreds of thousands of users) ?

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  3. That's pretty interesting, Todd. What are those packages? Are they commercially supported, or just projects that have sprung up in the soil around the Epicor main tree?

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  4. Here's a quick hit on Apax's latest efforts to get someone to buy this thing - http://www.erpgraveyard.com/2016/06/epicor-back-on-block-heavily-laden.html

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