Car repair specialist Belron borrows €2.2bn for dividend splurge

A global car windscreen repair company that sacked workers as it suffered from a sharp decline in business early in the pandemic borrowed just over €2.2bn across US and European loan markets this week to fund a bumper dividend to its owners.

Belron, which owns repair companies around the world including Autoglass in the UK, will use slightly more than €850m of the proceeds from the split jurisdiction deal, along with €614m of cash on its balance sheet, to fund a €1.5bn payday for its owners: publicly traded D’Ieteren Group and private equity company Clayton, Dubilier & Rice. The rest of the loan will go towards refinancing the company’s existing debts. 

The dividend deal is one of the largest of its kind on record, and the biggest disclosed by a flurry of companies using investor demand in the US loan market this year to funnel cash back to their private equity owners. 

It marks a swift turnround for the company, just one year after Belron closed branches across Europe as a result of government restrictions and laid off almost 1,000 workers at its American brand Safelite.

Tom Feeney, chief executive of Safelite, said at the time that demand for windscreen repairs plummeted due to the effects of Covid-19. The company slashed workers hours and furloughed 2,000 back-office staff, the publication Fortune reported.

“We will overcome this adversity and be better for it. How we operate going forward may look different, but we will remain true to our people, our values, culture, Safelite Spirit and our vision,” said Feeney at the end of March last year, according to a report in the publication Glassbytes.

Belron said a rebound in business in the second half of the year resulted in Safelite rehiring staff. “We now have more people at Safelite than we did last year,” it said.

Publicly traded D’Ieteren owns a majority share of Belron, alongside a small portfolio of companies that includes a car import business and the notebook brand Moleskin. Private equity group CD&R owns 40 per cent of the business. 

D’Ieteren recently announced 11.2 per cent profit growth for 2020, which it said was driven by a record year at Belron and a resilient automotive business.

In its recent , D’Ieteren said “stringent” cost control led to significant margin improvement at Belron, offsetting a 7.8 per cent decline in sales for the year. It added that growth of more complex windscreen replacements on more modern cars had also contributed to improved profit margins.

The company is proposing a €1.35 per share dividend to its own shareholders, according to its recent earnings report.

S&P Global Ratings upgraded Belron after the dividend, noting its “resilient” performance last year. Despite early pressures on the companies’ brands globally, a sharp recovery and growth of higher-priced product sales helped it recover.

The dividend is in line with Belron’s strategy since being acquired by D’Ieteren in 2017. It has repeatedly grown the business, reducing leverage, before using debt markets to finance dividends that re-lever the company. 

Belron issued a €400m loan in October 2018 to fully fund a dividend to its owners. It did the same again in October 2019 with an €850m loan.