Palamon portfolio company, Cambridge Education Group, completes £23 million financing package

Palamon Capital Partners (“Palamon” or the “Firm”), one of Europe’s leading mid market private equity firms, has concluded a transaction with Royal Bank of Scotland (“RBS”), to provide a £23 million financing package for its portfolio company, Cambridge Education Group (“CEG” or the “Company”) which includes a dividend recapitalisation for equity holders and additional debt financing for continued growth.

Cambridge Education Group is a leading UK provider of pre-University foundation programmes and English language training principally to foreign students keen to attend UK universities. Having identified the growing attractiveness of British education to international students Palamon acquired CEG in 2007 in partnership with a new management team led by Fergus Brownlee. Since that time, CEG has tripled revenue organically to £55 million by expanding its teaching capacity whilst focusing on providing the highest standards of education. Overall the number of students taught on an annual basis has more than quadrupled from 460 at the time of investment to more than
2,000 today.

The strength and profitability of the business has allowed the Company to secure a financing package including capital expenditure financing, mortgage backed and revolving credit facilities which will support its future growth. The financing has also enabled the repayment of Palamon’s initial capital plus a return of over 50%. Palamon and the management team continue to own a significant majority shareholding in the Company.

Dan Mytnik, Partner at Palamon Capital Partners commented, “With Cambridge Education Group, we have supported a well positioned company to execute a remarkable growth strategy. The business is on a clear path to continue increasing profitability significantly over the coming years by further developing its teaching capacity and enlarging its footprint.”

Fergus Brownlee, CEO of CEG said, “With Palamon’s financial and strategic support we have been able to execute an organic growth strategy that has tripled the size of the business in five years. With the additional backing of RBS we now have in place the facilities and capital structure to underpin the next stage of our development. We are delighted to have secured this backing.”

Peter Talbot Managing Director, Financial Sponsors, Midlands at Royal Bank of Scotland commented, “RBS has worked extensively with Palamon and have a good understanding of their growth investing model. We are therefore delighted to provide support to Cambridge Education Group, a fast growing and highly successful UK business. Under the leadership of a very strong management team CEG has clear drivers for future growth, which RBS is committed to supporting into the future.”

This is the third dividend recapitalisation that the Firm has completed since 2009, a reflection of the strength of both Palamon’s portfolio performance and its relationships with supportive banks. As Palamon’s growth investment strategy typically utilises modest levels of initial leverage, recapitalisations have successfully been used to return capital once a business has achieved scale. In every case Palamon has maintained a stake in the on-going businesses as they enter a period of accelerated growth.

Cambridge Education Group:

Cambridge Education Group is one of the foremost providers of pre-university academic, arts and English language teaching in the UK. Founded in 1985, the Group teaches a mix of overseas and UK students a wide range of academic subjects at Foundation, GCSE, A Level and International Baccalaureate levels. It has three college campuses in Cambridge, Canterbury and London and has established on-campus Foundation Programmes at a selection of well-known UK Universities. At the Cambridge School of Visual and Performing Arts it teaches a variety of arts programmes and through Safford House Study Holidays it runs educational summer camps throughout the UK and in parts of the USA. Since Palamon’s investment the company has taken advantage of the significant expansion opportunities and during 2012, CEG taught more than 2000 full time equivalent students, a substantial increase from the 460 taught at the time of Palamon’s investment in 2007.

Royal Bank of Scotland

The RBS group is a large international banking and financial services company. From its headquarters in Edinburgh, the Group serves over 30 million customers in the United Kingdom, Europe, the Middle East, the Americas and Asia. RBS is the leading provider of total debt solutions to the international leveraged finance market with extensive experience in delivering complex financing solutions, providing one stop shop financing for private equity firms, with a track record for deliverability and innovation.

For more information on RBS refer to www.rbs.com