KKR & Co. LP (NYSE: KKR) has acquired a minority stake in Preferred Sands Holding Co., a closely held supplier to oil-and-gas drillers.
The deal comes after months of Preferred Sands working with restructuring advisers due to a high debt load and poor operating results.
Preferred Sands mines sand and supplies various materials used in fracking and shale drilling, which uses large quantities of sand, mixed with water and chemicals that are injected into wells with immense pressure. The Radnor, Pa.-based company — through plants in Nebraska, Minnesota, Arizona, Wisconsin and Canada — distributes more than 9 million tons of sand a year to major basins across North America.
Preferred Sands, which began exploring a stake sale or a possible bankruptcy filing in September, had roughly $500 million in debt piling up as energy producers continued to cut back on drilling once natural gas and sand prices started falling.
According to a statement from Jamison Ely, a member of KKR’s special situations team, the private equity firm had following Preferred Sands "for a long time."
As part of the deal, KKR is providing debt and equity of more than $680 million as well as making a significant investment. Jefferies LLC jointly underwrote a new first lien credit facility for the transaction.
Preferred Sales has annual sales of about $350 million and remains majority-owned by its founder and chief executive Michael O'Neill, an entrepreneur who started as a Philadelphia banker.
Law partners Jeffrey Marell and Brian Hermann of Paul Weiss Rifkind Wharton & Garrison LLP handled legal matters for Preferred Sands.