In circumstances where funds have little to no unfunded capital commitments but their portfolio company requires additional short to medium term funding, we have recently been made aware of an innovative funding solution which enables the funding hole to be filled without security being taken by the lender (thus avoiding the additional cost, delay and complications associated with it). Instead, the lender seeks a guarantee from the fund as to the obligations of the portfolio company. This enables the lender to conduct their review quickly based on the strength of the fund rather than the portfolio company.
As we understand it, typical terms can include:-
- Target Investment Size: US$5-80 million
- Maturity: 1 to 5 years
- Target Coupon: ~10% (cash and PIK)
- Amortization: None
- Financial Covenants (portfolio company): None
- Negative EBITDA: Permitted
- Guarantor: PE, Distressed PE and Growth Equity/VC
If this solution is of interest to you, please do let us know and we will facilitate an introduction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.