New York equity fund buys Sargent Electric

Sargent Electric Co. is being sold for roughly $3.6 million to a New York City-based private equity fund that will keep the Sargent name and Frederic Sargent in place as chief executive.

Strip District-based Sargent, which filed for bankrutcy on May 10, is one of the nation's oldest and largest electrical contractors.

KPS Special Situations Fund II LP will pay $3.6 million in cash to repay Sargent's revolving loan and term debt holder SummitBridge National Investments LLC, a Denver-based investment group. KPS also has agreed to pay Sargent's professional fees in the transaction, not to exceed $350,000. The deal is expected to close by June 29. The deal must be approved by the bankruptcy court.

For its money, KPS will acquire substantially all of Sargent Electric's assets and will assume certain liabilities. Among the assets being acquired is the Sargent Electric Co. name, which will remain in place once the deal is completed. Excluded from the sale is Sargent's headquarters building at 2801 Liberty Ave., and property at 2847 Penn Ave. The new owner, however, intends to lease the headquarters facility.

Sargent could not be reached to comment. Attorney Paul J. Cordaro would not comment without his client's approval and representatives of KPS were unavailable.

Founded in 1907, Sargent at the time of the bankruptcy filing had 300 employees in Pittsburgh and satellite offices in Chicago and Terre Haute, Ind.

Liabilities to be assumed by the new Sargent Electric include accrued employee salaries, wages and vacations, as well as health insurance liabilities, union benefit obligations with the International Brotherhood of Electric Workers. Company retiree health benefits are excluded from the transaction.

KPS also expects to execute an employment agreement with company CEO Sargent, grandson of the company founder, according to a KPS letter of intent sent to turnaround consultant John C. DiDonato of Glass & Associates. Owners prior to the sale are Sargent, his mother and three siblings.

The letter of intent states that KPS's total outlay in the transaction is $8.6 million, including $3.6 million to SummitBridge, roughly $2 million to settle mechanics' liens, approximately $1.6 million for post-bankruptcy operations and employee costs, $1 million in transaction fees and $450,000 for a letter of credit supporting Workers' Compensation insurance.