Brentwood Associates Recapitalizes K-Mac and Paper Source

Dividend recapitalizations of K-Mac and Paper Source

Brentwood Associates (“Brentwood”), a consumer-focused private equity investment firm, announced it has completed dividend recapitalizations of two of its portfolio companies, K-Mac Holdings, Corp. (“K-Mac”) and Paper Source, Inc. (“Paper Source”). The K-Mac dividend was financed through excess capacity under the company’s existing $252 million credit facility, and provides a significant return on Brentwood’s original investment in the company. The Paper Source dividend was financed through a new $50 million credit facility, and provides a return that exceeds Brentwood’s original investment in the company. Brentwood’s ownership stake in both companies remains unchanged.

K-Mac is a leading quick-service restaurant franchisee founded in 1964 and headquartered in Fort Smith, Arkansas. The company is the largest Taco Bell franchisee in the country, operating 214 Taco Bell restaurants. K-Mac also operates 18 KFC and 6 Golden Corral restaurants. The company has a regional concentration in the South Central region of the U.S., with restaurants located in Arkansas, Indiana, Missouri, Oklahoma, Tennessee, Texas and Illinois.


Paper Source (, based in Chicago, Illinois, is a leading multi-channel retailer of a wide selection of unique paper products in distinctive colors and formats. The company sells specialty paper, invitations, stationery, envelopes, greeting cards, albums, crafting tools, gifts and novelties through its company-owned retail stores. Paper Source has 67 stores across 22 states and the District of Columbia. The company also has a direct-to-consumer business (catalog and e-commerce), and a wholesale business with over 1,000 accounts.


William Barnum, Jr., a Partner at Brentwood and co-founder of the firm’s private equity effort, commented, “Great operating results at both K-Mac and Paper Source, coupled with strong credit markets, have allowed us to return a significant amount of proceeds to our investors, while continuing to maintain financial flexibility at both companies. We are excited about the continued growth prospects at both K-Mac and Paper Source.”


These two transactions cap a highly active twelve months for Brentwood. During this time, Brentwood completed three new portfolio investments, including Sundance Holdings Group, Soft Surroundings, and The Veggie Grill. Brentwood also completed the sale of five portfolio investments, including Ariat International and Chamilia from the firm’s fourth private equity-dedicated fund, and Array Marketing Group, Filson Holdings, and Pacific Island Restaurants from the firm’s third private equity-dedicated fund. Other noteworthy activity included the sale of all of the Texas locations of Brentwood’s portfolio company Spectrum Athletic Clubs, and K-Mac’s add-on acquisition of No Limits, LLC, a Missouri-based Taco Bell franchisee that owns and operates 25 Taco Bell restaurants.


The financing for the Paper Source recapitalization was provided by Golub Capital. Bank of America Merrill Lynch, Wells Fargo Bank, and SunTrust Robinson Humphrey were joint lead arrangers on the senior debt financing for K-Mac.



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Brentwood Associates


Brentwood Associates is a leading consumer-focused private equity investment firm with over $650 million of capital under management and a thirty-one year history of investing in leading middle-market growth companies. Brentwood focuses on investments in growing businesses where it is able to leverage its extensive experience in areas such as: branded consumer products; consumer services; direct marketing, including direct mail and e-commerce; education; health and wellness; restaurants; and specialty retail. Since 1984, Brentwood’s dedicated private equity team has invested in 41 portfolio companies with an aggregate transaction value of over $5 billion. With significant experience in both investing and brand building, Brentwood is a value-added partner with entrepreneurs and executives building world-class companies. For more information about Brentwood, please visit