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How We Work Across Businesses:

Things Remembered
Brian Dillard
George Mueller
July 18, 2012

Confidential and Proprietary

Confidential and Proprietary

Overview & Company Background


Company

Things Remembered (TR) is the leading destination for personalized


gifts in the U.S. and a preeminent national retailer within the highly
fragmented $15 billion U.S. gift store industry
650 retail locations in 49 states and Canada, with annualized same store
sales growth of over 3.2% over the last two years
Burgeoning online presence, growing at 23% per annum over last two
years
LTM Revenue and Pro Forma Adjusted EBITDA of $305.0 million and $41.4
million, respectively
Sponsor

Madison Dearborn Partners, based in Chicago, is one of the largest and


most active private equity firms in the U.S.
Formed in 1992, MDP has raised six funds with aggregate capital of over
$18.0 billion
Completed investments in ~120 companies
Deep consumer and retail experience with investments in Yankee Candle,
Bolthouse Farms, Ruths Chris Steakhouse, Tuesday Morning, Cornerstone
Brands, and BevMo!
2

Retail Overview (87% of Revenue)


Format: Retail (90%), Kiosk (10%)

In Store Merchandising

Direct Overview (13% of Revenue)

Company Overview
Location Overview

Customer Age

Cust. Income

Sales by Type

(1)

Seasonality

Personalization % Sales

5 (1)Measured by FY 2010 revenue (2) Measured by FY 2011 EBITDA

(2)

Confidential and Proprietary

Transaction Overview
Process
Bruckmann, Rosser, Sherrill and GB Merchant Partners, owners of TR since
a 2006 buyout, hired Oppenheimer to conduct an auction of the asset
KKR Capital Markets* and KKR Asset Management offered financing
support to multiple bidders
Ultimately, KCM was engaged by MDP, and provided certainty of funds to
differentiate the Sponsors winning bid
KCM was retained as sole lead arranger, sole bookrunner, and
syndication agent on $147 million of senior secured credit facilities
KAM was an anchor order in the syndication, obtaining the top
allocation
Transaction
SOURCES OF FUNDS
$
xEBITDA
Revolver ($30)
Term Loan
Mezzanine
Equity

3
117
30
156

0.1x
2.8x
0.7x
3.8x

1%
38%
10%
51%

Total

$306

7.4x

100%

Note: $ in millions
6*

KKR Capital Markets LLC and its affiliates.

USES OF FUNDS
$
Purchase Price
Fees/Expenses

$ 279
27

Total

$306

KKR Internal Process

KCM
&
KAM

Performed business diligence, including a management


presentation
Engaged retail private equity team to incorporate their perspective
on the category and business, while being mindful of
confidentiality restrictions
Worked with sponsors to develop capital structure alternatives
Developed view on markets appetite for the financing to gauge
the likelihood of a successful syndication

KCM

KCM also evaluated the underwriting terms including covenants,


flex, and fees

KCM presented their findings to the KKR Balance Sheet


Committee composed of Henry Kravis, George Roberts, Scott
Nuttall, Todd Fisher and Bill Janetschek

KAM

The KAM deal team synthesized diligence into an investment memo


and presented to the KAM Investment Committee, composed of Bill
Sonnenborn (Head of KAM), Fred Goltz (Mezzanine PM), Chris
Sheldon and Erik Falk (Liquid Credit PMs), and Nat Zilkha and Jamie
Weinstein (Special Sits PMs)

Confidential and Proprietary

High Quality Order Book Lead By KAM


Lender
1
2
3
4
5
6
7
8
9
10

Revolver

Term Loan

Total

KAM
Ares
Barclays
Orix
NXT C apital
Blackrock
Solar
Perot
KC M
C rescent

5
15
3
7
-

35
25
12
14
10
9
8
4

35
30
15
15
14
10
9
8
7
4

Total :

30

117

147

Benefits to the Firm


Sourcing
Investment

KAM sourced a large commitment for the new senior lending


fund at attractive pricing and terms
KKR clients & LPs obtained access in the fund and via direct
syndication
Represented the first sole-managed syndicated deal by KKR

Branding

Revenue &
Risk

Client was a large-cap sponsor, unaccustomed to working


with us

$3.6mm total fees to KKR


All risk syndicated excluding small revolver residual
KAM obtained underwriting fee, increasing investment return

Follow On
Opportunity

MDP has reached out since on additional lending


opportunities for KAM and KCM
KCM and KAM will support MDP over the life of the
investment
Another win-win-win situation for all parties

Experience
9

Build on template for how KKR can provide solutions for


external clients

Confidential and Proprietary

Attractive Economics to KKR


Economics to KKR

$3.65

$2.60

$1.05

Total

KCM

KAM

Term Loan Economics

x
=
x
=

Size
KC M % of Underwrite
KC M Underwrite
Arrangement Fee %
Fees to KKR

KAM Allocation
x Arrangement Fee %
= Fees to KAM
Fees to KKR
Fees to KAM
= Fees to KCM
Term Loan Fees
KCM
KAM

Revolver Economics

x
=
x
=

$ 117.0
100.0 %
$ 117.0
3.0 %
$ 3.5

x
=

$ 35.0
3.0 %
$ 1.1

$ 3.5
$ (1.1)
$ 2.5
$
$
$

3.5
2.5
1.1

x
=
x
=

Size
KC M % of Underwrite
KC M Underwrite
Fee %
Gross Fees to KKR

=
x
=

Par
Fees to Market
Structuring Fee
Est. MTM Valuation
Loss on Hold
KC M Hold
Loss on Hold

Note: Analysis assumes a valuation of 0.8 on KCMs remaining $7 million revolver hold.

10

Revolver Net Fees


KCM
KAM

x
=
x
=

$ 30.0
50.0 %
$ 15.0
3.0 %
$ 0.5

=
x
=

100.0 %
(3.0)%
(12.5)%
(80.0)%
4.5 %
$
7.0
$ 0.3
$ 0.1
$ 0.1
$
-

Confidential and Proprietary

Important Information
These materials have been provided to you by KKR Capital Markets LLC (KCM), a broker-dealer registered with the U.S. Securities and
Exchange Commission, a member of FINRA and a member of SIPC, on behalf of itself and/or its affiliates in connection with an actual or
potential mandate or engagement and may not be used or relied upon for any purpose other than in connection with the evaluation of
such potential mandate or engagement. This presentation is not a commitment to lend, syndicate a financing, underwrite or purchase
securities, or commit capital, nor does it obligate KCM to enter into such a commitment. KCM is not acting as a fiduciary to you.

This material is solely for informational purposes and shall not constitute an offer to purchase or sell, or the solicitation of an offer to
purchase or sell, any securities. These materials may not be disclosed, summarized or otherwise referred to, in whole or in part, except as
agreed to in writing by KCM. The information presented in these materials has been developed internally and/or obtained from sources
believed to be reliable; however, KCM does not guarantee or give any warranty as to the accuracy, adequacy, timeliness or completeness
of such information, and assumes no responsibility for independent verification of such information.

To the extent such information includes estimates or forecasts of future financial performance (including estimates of potential cost
savings and synergies) prepared by or reviewed or discussed with representatives of your company and/or other potential transaction
participants, or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of such representatives (or, with respect to estimates and forecasts
obtained from public sources, represent reasonable estimates). Any forward-looking statements speak only as of the date they are made,
and KCM assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to
numerous assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those projected in
these materials due to factors including, without limitation, economic and market conditions, political events and investor sentiments,
liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, and competitive conditions.

These materials were designed for use by specific persons familiar with the business and the affairs of your company and KCM assumes
no obligation to update or otherwise revise these materials. KCM does not provide tax, accounting, financial, investment, regulatory, legal
or other advice, and you are advised to consult with your own tax, accounting, financial, investment, regulatory or legal advisers. You
(and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other
tax analyses) that are provided to you by KCM relating to such tax treatment and structure. For this purpose, the tax treatment of a
transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any
fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction.

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