HON Honeywell International Inc

By Amy Or 

Blackstone Group LP is contemplating a proposal by New Mountain Capital that could give it a minority stake in JDA Software Group Inc., as talks to sell the supply-chain management software provider to Honeywell International Inc. continue, said people familiar with the situation.

New Mountain last week reached out to fellow New York firm Blackstone, proposing a $570 million structured financing deal in exchange for preferred stock and equity warrants in JDA that would entitle the private-equity giant to a 40% stake in the company and guarantee a return of 7.5%, one of the people said.

The person added the deal is contingent on the outcome of JDA's negotiations with Honeywell, an industrial conglomerate that makes products ranging from air conditioners and commercial boilers to airplane-cockpit controls and industrial gloves. The Wall Street Journal reported this week Honeywell is close to sealing a deal to acquire JDA for about $3 billion, including debt.

Reuters previously reported that Honeywell was in talks with JDA and later said Blackstone had offered a financing plan to JDA.

Blackstone, along with a number of other large private-equity firms, including Carlyle Group LP and KKR & Co., already passed on the opportunity to purchase the asset when New Mountain reached out to them over the past few months regarding an outright sale of the business, said people familiar with the situation.

In soliciting Blackstone as a potential investor in JDA, New Mountain is actively exploring a number of options to address the high levels of debt at the company.

Another of the people familiar with the deal said a recapitalization would enable JDA to reduce its debt and save $70 million in interest expenses, and would provide it with additional capital to fund research and development efforts.

This person said the financing plan is just one of several options New Mountain is contemplating, which include remaining the majority owner of JDA.

JDA has about $2 billion in outstanding debt, representing about nine times its earnings before interest, taxes, depreciation and amortization, said the people.

Credit-ratings firm Moody's Investors Service in March downgraded the corporate family rating for JDA's parent, RP Crown Parent LLC, to Caa1 from B3. Moody's said in the release that RP Crown's debt level "may be unsustainable."

About $1.45 billion of JDA's first-lien term loan comes due in December 2018, said the people. Although there is no risk of an imminent covenant breach, said these people, it is typical for auditors to look at a company's leverage levels six to nine months ahead of a debt maturity to determine if the company is healthy enough for a refinancing deal. This leaves a few more months for JDA and its backer to make liquidity plans.

Write to Amy Or at amy.or@wsj.com

(END) Dow Jones Newswires

August 18, 2016 15:34 ET (19:34 GMT)

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