Sycamore Partners on Tuesday engineered a $5.4 billion refinancing of Staples Inc., which it bought in 2017, that funded a $1 billion dividend to the private equity firm, Bloomberg News reported. Combined with a payment it took in January, it means Sycamore has recovered — in less than two years — roughly 80 percent of the equity it originally put up as part of the deal. Sycamore’s aggressive tactics have at times led to litigation and claims from creditors of hastening or exacerbating losses. That kind of financial engineering had seemed to be the playbook after Sycamore bought Staples at a valuation of $6.9 billion, its biggest takeover ever. Sycamore contributed $1.6 billion of equity and raised $4 billion of debt for the company’s more promising wholesale division, which sells office supplies to large corporations, according to people familiar with the matter. At the same time it spun off the U.S. and Canadian retail operations into separate entities. Sycamore took $300 million of that equity back in January as part of a complex deal to acquire Essendant Inc., another office supplies distributor, and then soon started pitching the dividend recapitalization that would pay them another $1 billion. But that proposal, missing typical investor protections, so alarmed some creditors that, on the day investors were told about the deal, the cost to insure Staples debt against default for five years saw its biggest increase since 2012, according to data provider CMA.
