Cash Flow Lenders in the $10M investment range, high D/E

investor profile

January 02, 2020

by an investor from Harvard University - Harvard Business School in Houston Heights, Houston, TX 77008, USA

We are looking at a $3.3M adj. EBITDA developmental disabilities company. 90% of the add backs are the owner's W2s. The business has 5+ years of consistent performance. We're under LOI with the seller for $11M (3.3x) - long story on how/why. Considering the excellent debt service coverage the deal will provide, we're hoping to put in ~10% equity. There will be a $1M seller note. We're looking for cash-flow lenders (close to 0 collateral) comfortable with a high D/E ratio and an investment of ~$9M. Any thoughts on mezz or unitranche lenders who would be interested would be greatly appreciated.

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Reply by a searcher
from University of Pennsylvania in Miami, FL, USA
It is tough sell to any lender....you could likeley get ~40% senior and then would need to put junior capital underneath. My experience is you generally need 25-30% equity, and seller note may or may not count depending on the lender. check out Corbel, Stonehenge, Merion, Tecum.
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Reply by a searcher
from Carleton University in Calgary, AB, Canada
With such low equity, this will be a tough ask. However, we know a few groups who might be able to get this done (likely a combination of bank & mezz, or unitranche, as you suggested). Send me an email at redacted and I can share more detailed thoughts.
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