Any mezz or senior lenders who could provide capital for $43M transportation deal?

searcher profile

July 25, 2024

by a searcher from Rice University - Jesse H. Jones Graduate School of Business in Houston, TX, USA

Hi SF Community!

Any mezz and senior lenders who could provide capital for $43M transportation deal in lieu of a large equity check in? Seller financing of $3M also available. Thank you!


Also, I have a lender willing to do 70% LTV, so would need to find mezz for the remaining portion. Revenue of company is ~$27M and ~$6.6M in EBITDA

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commentor profile
Reply by an investor
from University of Pennsylvania in Charlotte, NC, USA
We know many mezzanine providers but all require a viable capital structure including sufficient equity capital and a credible party arranging the transaction. They require adequate information on the operating entity for their due diligence. They don't have interest in considering a transaction that is still in the process of casting about hoping to pull something together - i.e. equity is in question, senior lender is "williing" but not committed, etc., which seem to be elements here.

Based on the question itself, the situation sounds highly speculative at best with red flags flying: (1) You're looking for "mezz and senior" lenders? But you say you already have a senior lender? (2) "in lieu of a large equity check in" - what does this mean? Mezzanine is not equity. (3) What is the capital structure - you don't say how much equity is in the deal and from whom. (4) "I have a lender willing to do 70% LTV" - strange statement as senior lenders rarely do acquisition financing based on LTV and at any rate what is the "V"? because if it's the purchase price then that is not a credible claim. Do you have a true commitment letter from a lender who has completed their underwriting? And who is aware you're trying to put additional debt on the company? (5) Assuming transportation means carrying freight, you're dealing with a cyclical business that is subject to significant margin compression and is highly capital intensive (assuming they own the assets) with low barriers to entry - it would be highly overleveraged with the senior debt alone, so mezzanine seems very unrealistic - which suggests a hail Mary approach that's not appealing to any provider we know. (6) "...for the remaining portion" What does this mean?

If you can address these points maybe someone here will have a sense of whether/how to respond.
commentor profile
Reply by a searcher
from Virginia Polytechnic Institute and State University (Virginia Tech) in Blacksburg, VA, USA
I have a portfolio of transportation companies. The net margins here seem a little too high. I will caution you -- be very careful with capex. If you're experienced in this industry, feel free to disregard. But if you're not, you should base an offer on FCF, not EBITDA. If you aren't properly accounting for capex then you can get yourself in trouble if you're highly leveraged.
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