We welcome the opportunity to work with private equity sponsors, corporate acquisition groups, chief financial officers ( CFO's ) and treasurers to structure and arrange a subordinated loan, subordinated debt or mezzanine debt at a competitive rate. Subordinated debt structures can vary significantly and are subject to market conditions and your company's cash flow and credit profile.
Typically subordinated debt are cash flow loans and structured in the Prime + 2% to Prime + 8% range, requiring at least a 1.2 interest coverage ratio. Common maturities are from three (3) to six (6) years. In addition, equity warrants or other forms of an equity kicker may be required to balance the level of risk with the lender's targeted return on investment ( ROI ). When the subordinated debt is used to facilitate an acquisition, the acquisition valuation should be in excess of $20 million at the appropriate valuation of three (3) to seven (7) times EBITDA, with the subordinated debt or mezzanine debt not exceeding 20% to 30% of that value.
The vetting process will include evaluating your company's historical operating cash flow and EBITDA, as well as, the business cycle risk of your industry, seasonality of your business, and credit risk profile and concentration of your company's customer base. We can also employ risk management financial structuring products, such as, credit insurance and financial derivatives, when appropriate.
Deschutes Capital welcomes the opportunity to work with you and your company. Whether your company needs a subordinated loan or subordinated financing to complete the mergers and acquisitions of a company or assets, to exploit growth opportunities or refinance a maturing loan, please submit a corporate finance inquiry form so that an account executive can discuss your company's subordinated debt financing needs.
Uses and Purposes of Subordinated Debt
Deschutes Capital can structure and arrange a subordinated loan, subordinated debt or mezzanine debt to meet your company's needs, based on the level and stability of your company's historical operating cash flow or EBITDA, being sufficient and the debt to income ratio, as well as, debt to equity ratio being acceptable. Whether your company needs additional financing to :
- refinance corporate debt,
- finance expansion and company growth,
- acquire additional corporate assets,
or for a :
- leveraged buyout or management buyout,
- corporate recapitalization, or
- corporate restructuring,
Deschutes Capital can help.
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