Upload
jeffery-mcdonald
View
216
Download
1
Embed Size (px)
Citation preview
1
ACG St. Louis
The State of the Credit Markets
June 19, 2009
Ronald KahnManaging DirectorLincoln International LLC(312) [email protected]
2
Experience with High Profile Financial SponsorsLincoln International’s investment bankers have worked with a number of high profile sponsors to
execute financings across a range of transaction types and capital structures
Transaction Types
Acquisition Financing
Closes concurrently with acquisition
Coordination and commitments are paramount
Critical to have options available to the end
Post - Acquisition Financing
Initial deal is bridged / over-equitized to guarantee quick closing
Effected post-acquisition to optimize solicitation process and/or take advantage of credit market conditions
Refinancing
Improve pricing and other terms
Take out fatigued lender(s)
Rebalance senior and junior tranches
Expansion Financing Creates additional availability to fund growth
Possibly includes a delayed draw capex or acquisition line
Dividend Recap
Proceeds to shareholders in the near-term
ABL and mezz less sensitive to dividends
Interim realization when a sale is not optimal or timely
ABLsCash Flow
LoansSale-
LeasebacksSecond
LienMezzanine/ Sub Debt
Minority Equity
Types of CapitalPlaced by Lincoln
3
The Market at a CrossroadsTechnical aspects of the market have been improving . . .
Average First- and Second-Lien Secondary Spread (Index of 15 Largest Issuers with Both Tranches) Market Dynamics
Source: Standard & Poor’s Leveraged Commentary and Data (as of 4/23/2009)
Average Bid and Ask of Leveraged Loans
Source: Standard & Poor’s Leveraged Commentary and Data
Bloomberg US Industrial BB Yield Curve
Source: Bloomberg
• Greater demand for higher-yielding debt securities has driven yields
downward
• The re-pricing of credits, in conjunction with amendments and
extensions, has resulted in higher yields and, therefore, higher loan
values
• A resurgence in the high-yield market has resulted in the repayment
of leveraged loans, creating additional liquidity
60
70
80
90
100
110
All Loans First-Lien Loans
4.000
6.000
8.000
10.000
12.000
0.25
1.75
3.25
4.75
6.25
7.75
9.25
Maturity (in years)
Yie
ld
(in
%)
March 31, 2009 Curve June 11, 2009 Curve
L+ 000
L+ 800
L+ 1600
L+ 2400
L+ 3200
L+ 4000
L+ 4800
Jul-0
7
Sep-0
7
Nov-0
7
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep-0
8
Nov-0
8
Jan-
09
Mar
-09
May
-09
Jul-0
9
First-Lien Second-Lien
4
And the price per share of most BDCs is on the rise, as BV/share begins to stabilize . . .
BDC Performance
Last 18 Months of BDC Price per Share and BV/Share
Market Dynamics Last 18 Months of BDC Price per Share and BV/Share
Source: Capital IQ
Source: Capital IQ
• Lincoln created an index to monitor the price per share and book
value per share of the eleven largest business development
corporations (“BDCs”) (market cap over $180 million)
• Since December 2007, while the BV/share of each BDC has
deteriorated 34.4%, the average price per share of Lincoln’s BDC
index has decreased by 63.7%
• Recently, the price per share index has begun to improve, and the
gap between price per share and BV/share has narrowed
• Signs of returned strength to BDCs indicate potential for additional
liquidity and improved conditions throughout the broader financing
markets
$2.00
$5.00
$8.00
$11.00
$14.00
$17.00
Price per Share BV/Share
12/31/2007 x 12/31/2008 x 3/31/2009 x 6/15/2009 x
Business Development Corporation Price per Share BV/Share Price per Share BV/Share Price per Share BV/Share Price per Share BV/Share
Ares Capital Corporation 14.63$ 15.47$ 6.33$ 11.27$ 4.84$ 11.20$ 7.79$ 11.20$ Allied Capital Corporation 21.50 17.54 2.69 9.62 1.59 7.67 3.31 7.67 American Capital, Ltd. 32.96 32.88 3.24 15.41 1.87 12.32 4.28 12.32 Apollo Investment Corporation 17.05 17.71 9.31 9.87 3.48 9.82 6.90 9.82 BlackRock Kelso Capital 15.28 13.78 9.86 9.23 4.19 9.04 6.81 9.04 Compass Diversified Holdings 14.90 13.73 11.25 14.73 8.92 13.61 8.18 13.61 Hercules Technology Growth Capital, Inc. 12.42 12.31 7.92 11.56 5.00 10.94 8.04 10.94 KKR Financial Holdings 14.05 14.35 1.58 4.43 0.88 4.59 1.09 4.59 MCG Capital Corporation 11.59 12.73 0.71 8.66 1.28 8.02 2.50 8.02 MVC Capital 16.14 15.21 10.97 17.36 8.41 17.28 8.39 16.84 Prospect Capital 13.05 14.58 11.97 14.43 8.52 14.19 9.34 14.19
Average 16.69$ 16.39$ 6.89$ 11.51$ 4.45$ 10.79$ 6.06$ 10.75$
5
Loan Volumes and M&A Activity – Waiting to RecoverHowever, loan volumes and M&A activity remain anemic . . .
Source: Standard & Poor’s Leveraged Commentary and Data
Source: Factset Mergerstat
Note: Transaction Values between $10 million and $250 million
Total Middle Market Loan Volume ($ in billions) (Issuers with EBITDA of Less Than $50 million)
Middle Market M&A Transaction Volume (Rolling TTM)Market Dynamics
Source: Standard & Poor’s Leveraged Commentary and Data
Global New-Issue Leveraged Loan Volume ($ in billions)
$256.0 $264.0$238.3
$201.1$177.2
$218.8
$340.2
$448.1
$650.5
$762.0
$233.9
$58.0$12.5
$0
$150
$300
$450
$600
$750
$900
$26.7
$38.7$41.3
$34.5
$11.9
$17.2
$12.5
$26.0
$34.8 $34.2
$28.7
$8.0
$0.3
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
1,5611,602
1,666
1,7521,799
1,7581,806
1,900
2,047
2,1392,108
1,997
2,1072,168
2,001
1,9101,845
1,8111,761
1,508
1,279
1,039
1,797
1,625
1,000
1,250
1,500
1,750
2,000
2,250
2,500
Num
ber o
f Tra
nsac
tions
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160
$170
$180
Transaction Value in Billions
Number of Deals Transaction Value
• The recent stagnation in loan volume and M&A activity is due to a
combination of:
– Continued poor economic conditions
– Lack of visibility into many borrowers’ future performance
– The underwriting standards of lenders still providing capital have
remained very tight
– Mismatch of buyer and seller expectations
6
Despite the improvement in the technical aspects of the market, the fundamentals remain weak . . .
Credit Quality – The Great Indicator
Percentage of Issuers with Outstandings in Payment Default or Bankruptcy
Source: Standard & Poor’s Leveraged Commentary and Data
Market Dynamics
Source: Standard & Poor’s Ratings Direct
U.S. Speculative-Grade Default Rate and 12-Month Forward Forecast
0.0%
3.0%
6.0%
9.0%
12.0%
15.0%
De
fau
lt R
ate
s
U.S. Speculative-Grade Default Rate Default Rate Forecast Recession Bars
• Defaults have been rising and are expected to continue to increase
throughout 2009
• Increase in defaults delayed by:
– Covenant-light transactions
– Use of equity cures
– PIK toggle provisions
• According to LCD, EBITDA is down by an average of 15% vs. last
year; the reduction in EBITDA has resulted in an increase to total
leverage ratios
• Significant increase in restructuring activity is anticipated
7
Increase in Amendment ActivityThe deepening economic slump has sparked increased amendment activity
Leveraged Loan Market Monthly Amendments Dynamics of Amendment Activity
Source: Standard & Poor’s Leveraged Commentary and Data
1
5
9
4
6
34
2
5
32
1
4
2 2
5
8
5
27
21
6
1514
12
17
29
19
10
33
44
66
49
62
20
1
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
Aug-0
6
Oct
-06
Dec-0
6
Feb-0
7
Apr-0
7
Jun-
07
Aug-0
7
Oct
-07
Dec-0
7
Feb-0
8
Apr-0
8
Jun-
08
Aug-0
8
Oct
-08
Dec-0
8
Feb-0
9
Apr-0
9
Throu
gh 6
/15/
2009
• As of June 16, 2009, there have been 192 amendments that have
been approved vs. 54 during the same period last year
• The economic recession has resulted in a steady increase in the
number of defaults. Lenders have been able to improve their
position by providing amendments and forbearance agreements for
existing credits
• Recent amendment activity has shown the following dynamics:
– Amendment Fees: On average, issuers paid 48 basis points
of amendment fees in May, down from 60 basis points in
1Q09
– Rate Increases: Raising rates are typically the highest
priority for lenders who provide amendments; the average
spread increase in May was 191 basis points, down from 204
basis points in 1Q09 and 202 basis points in 4Q08
– Reduction in line: 1Q08 through 2Q09 have shown more
amendments requiring a reduction in line commitments
– Paydowns: Approximately 10% of amendments over the first
five months of 2009 have required borrowers make a
paydown to the amount outstanding
2008 2009 % Change
YTD Approved Amendments 54 192 256%
8
Between 2004 and early 2007, the capital markets introduced new forms of debt financing and competition resulted in higher multiples, lower pricing and more flexible terms
Transition of Debt Capital Availability – “The Credit Bubble”
Limited Sources of Debt Financing Available Prior to 2004
RevolverTermLoan
Libor +275
Libor +325
SubordinatedNotes
22%
PreferredStock
27% 30%
CommonEquity
Revolver Term Loans
Libor +250
Libor +400 - 900
Libor +350
Last OutSenior
TrancheB
SecondLien Loans
Enterprise ValueSecond Lien Loans
Rate OnlySub Debt
15 - 17%
Sub DebtW/ Warrants
17 - 19%
PreferredStock
21 - 25% 25%+
CommonEquity
Traditional BanksFinance
Companies BDCs Hedge FundsInsurance
CompaniesMezzanine
FundsPrivate Equity
Funds
Increased Sources of Debt Financing and Competition by 2007
9
For about the past year and one half, there has been a continual reduction in both the number of lenders and the types of securities available
Current Market Liquidity
Current Landscape of Debt Financing
Revolver1 Term Loans1
Libor +
550 - 650 (Cash Flow)
300 - 400 (ABL)
Libor +
600 - 700 (Cash Flow)
350 - 450 (ABL)
Last OutSenior
TrancheB
SecondLien Loans
Rate OnlySub Debt
Traditional
16 - 20%
PreferredStock
18 - 23% 20 - 25%+
CommonEquity
Traditional BanksFinance
Companies BDCs Hedge FundsInsuranceCompanies
MezzanineFunds
Private EquityFunds
Sub Debt2
1.) LIBOR floor typically established for revolver and term loans; 300 – 350 basis point floor for cash flow loans and 200 – 250 basis point floor for asset-based loans
2.) Traditional sub-debt must include warrants or co-investment
• Continued decline in the number of active senior and second lien lenders
• Capital providers that remain are gravitating towards larger companies
• Senior debt with minimal amortization (Tranche B loans), as well as second lien loans and rate only subordinated debt, are rarely available
• Landscape gravitating back to conditions similar to those pre-“Credit Bubble”
10
Financing Sources – Current Landscape
Active lenders are seeing significant deal flow and have increased underwriting standards
• Primarily focused on large credits of higher quality (BB and above)
• New issue activity remains sparse
• Any lending to the middle market is primarily asset-based
Money Center Banks
• Primarily focused on large credits of higher quality (BB and above)
• New issue activity remains sparse
• Any lending to the middle market is primarily asset-based
Money Center Banks
• Recently retrenched from middle market lending
• Raising capital to shore up their own balance sheet issues
• Any lending done by regional banks is primarily asset-based
Regional Banks
• Recently retrenched from middle market lending
• Raising capital to shore up their own balance sheet issues
• Any lending done by regional banks is primarily asset-based
Regional Banks
• Trading under book value, restricting ability to raise new capital
BDCs
• Trading under book value, restricting ability to raise new capital
BDCs
• CLO vehicles continue to be capital constrained
• While some equity may be available, obtaining leverage is problematic
• Primarily recycling existing capital
CLO Vehicles
• CLO vehicles continue to be capital constrained
• While some equity may be available, obtaining leverage is problematic
• Primarily recycling existing capital
CLO Vehicles
• Many have exited or retrenched from the market
• The few that remain are seeing heavy deal flow
• Many are focused on larger companies and top tier sponsors
Commercial Finance
Companies
• Many have exited or retrenched from the market
• The few that remain are seeing heavy deal flow
• Many are focused on larger companies and top tier sponsors
Commercial Finance
Companies
• Facing issues related to broader capital markets, forcing some to exit the financing market
• Those who remain have gravitated towards larger deals, providing better returns
• Continue to be opportunistic and very yield-focused
Hedge Funds
• Facing issues related to broader capital markets, forcing some to exit the financing market
• Those who remain have gravitated towards larger deals, providing better returns
• Continue to be opportunistic and very yield-focused
Hedge Funds
• Funding source remains constant• Pricing has moved upwards• Usually now require warrants or co-
invest opportunities• Proliferation of deal flow resulting in
more selectivity
Mezzanine Funds
• Funding source remains constant• Pricing has moved upwards• Usually now require warrants or co-
invest opportunities• Proliferation of deal flow resulting in
more selectivity
Mezzanine Funds
11
33
72
81
6058
52
3634
28
66
80
98
110
49
-
20
40
60
80
100
120
Sources of Capital – A Changing EnvironmentWhile many traditional cash flow senior lenders have exited the market, senior asset-based
lending has increased in popularity
Source: Standard & Poor’s Leveraged Commentary and Data Source: Standard & Poor’s Leveraged Commentary and Data
Asset-based Lending as a Percentage of All Leveraged Loans
Most Active Pro Rata Investors (Lenders that Made Ten or More Primary Commitments)
53.5%
42.7%
5.3%
9.4%
5.4%7.1%
20.4% 20.9%
0.0%
20.0%
40.0%
60.0%
~54%
decline
12
Senior Lenders – A Changing Landscape
3.5x 3.4x 3.4x
3.1x
2.8x
3.1x3.0x 3.0x
3.4x3.7x 3.6x
4.7x
4.0x
3.7x
3.3x
2.9x
3.5x
2.1x
0.0x0x
1x
2x
3x
4x
5x
Decreasing availability of senior debt has driven senior leverage downwards and pricing upwards
Average Senior Debt Multiples of LBO Middle Market Loans
Source: Standard & Poor’s Leveraged Commentary and Data
Note: Data on Average Senior Debt Multiples is not available for 1Q09 due to lack of market activity
Source: Standard & Poor’s Leveraged Commentary and Data
Average Institutional Spreads of Middle Market Loans(Issuers with EBITDA of Less Than $50 million)
Market Dynamics
L+360 L+371L+396
L+438
L+367L+330
L+303L+281
L+344
L+400 L+415 L+428
L+600
L+499
L+000
L+100
L+200
L+300
L+400
L+500
L+600
L+700
1999
2000
2001
2002
2003
2004
2005
2006
2007
1Q08
2Q08
3Q08
4Q08
LI E
stim
ate
2009
• Senior cash flow lending for companies with under $10 million of EBITDA is extremely limited
• Cash flow loans are limited to companies with strong fundamentals that are perceived to be recession resistant
• Currently there are no underwritten deals in the market
• “Club” deals are more the norm, with hold sizes rarely exceeding $20-$25 million and often in the $10-$15 million range
• Due to the decline in financial performance in 4Q08, lenders are now less focused on TTM performance and more focused on the last six months
or 2009 run rate
• Senior lenders are increasingly focused on the “agency” role when deciding whether to participate in a transaction
• Increased amortization now required – focus on fixed charge coverage
• Any changes to the existing agreements (i.e., forbearance agreements, amendments, waivers) are resulting in a re-pricing of the outstanding loans
13
0
100
200
300
400
500
600
Asset Based All-in Institutional
Asset-based Lending – A Market Re-emergingAsset-based lending has been established as an attractive funding alternative
for companies with appropriate collateralAsset-based Spreads vs. BB/BB- All-in Institutional Spreads
Typical Asset-based Formulas
Asset-based Lending Market Dynamics
Source: Standard & Poor’s Leveraged Commentary and Data
Note: Data on Asset-based Spreads is not available for 1Q09 and 2Q09 due to lack of market activity
• Accounts Receivable: 80% - 85%
• Inventory: 50% - 60%
• Real Estate: 60% - 70% of FMV
• Machinery and Equipment: 80% - 90% of OLV
Funding Availability
• Liquidity exists in this traditional structure provided an issuer has a
significant base of assets
• However, asset-based lenders are becoming more conservative and
focused on company fundamentals
Relative Cost Advantages
• Pricing has increased in tandem with the broader credit markets;
however, it remains lower than cash flow loans by approximately 200
- 250 bps
• Closing fees are increasing as negotiating leverage has returned to
the lending community
Not a Universal Remedy
• Not available for service businesses or companies with little base of
hard assets
• Increased reporting requirements
Reliability of Appraisals
• In light of the recent economic downturn, asset-based lenders have
begun questioning the reliability of asset appraisals and, as a result,
are reducing the amount of term loans they are prepared to provide
borrowers
14
Second Lien Loans – Middle MarketSecond lien loans relying on collateral may be a junior capital alternative when paired with
ABL first lien loans
Source: Standard & Poor’s Leveraged Commentary and Data
Source: Standard & Poor’s Leveraged Commentary and Data
Second Lien Loans as a Percentage of Mid-Market Volume
Second Lien PricingMarket Dynamics
Source: Standard & Poor’s Leveraged Commentary and Data
Second Lien Quarterly Volume in the Total Market ($ in billions)
L+1033
L+893
L+654
L+720
L+661L+572L+559L+640
L+667L+664
L+729
L+513
L+583L+603
L+1069
L+300
L+450
L+600
L+750
L+900
L+1050
L+1200
0.0%0.6%0.6%1.6%1.7%0.9%
5.3%
11.5%
17.7%
9.2%
12.8%
8.7%
0%
5%
10%
15%
20%
25%
$4.4
$3.1$2.7
$1.8
$5.8
$3.9
$2.5
$4.1
$6.8
$5.7 $5.6
$10.2
$14.0
$2.4 $2.2$1.3 $0.9 $0.8
$0.0 $0.3
$11.2
$0
$2
$4
$6
$8
$10
$12
$14
$16
• Due to inter-creditor issues, second lien loans are no longer paired
with senior cash flow loans; however, opportunities are still
available when matched with asset-based loans
• Market conditions have once again begun to resemble the
environment in which second lien loans originated
– Asset-based lenders are becoming more conservative,
leaving more collateral value for second lien lenders
– Higher priced sub-debt leaves the door open for an additional
security
15
Mezzanine Debt – Growing in PopularityMezzanine debt has become all but essential in completing any kind of financing
Market Dynamics
Source: Standard & Poor’s Leveraged Commentary and Data
Note: Data on Average Total Debt Multiples is not available for 1Q09 due to lack of market activity
Average Total Debt Multiples of Middle Market LBOs
4.7x4.8x
4.1x4.0x
3.4x
3.9x3.8x
4.2x4.7x 4.7x
5.1x
6.2x6.0x
5.6x
4.5x4.1x
Sub Debt as a Percentage of Total Leverage (Issuers with EBITDA of Less than $50 million)
4.7x
2.6x
Mezzanine Pricing
All Other Debt
87.8%
Sub Debt12.2%
2007
All Other Debt
95.7%
Sub Debt4.3%
2008
Source: Standard & Poor’s Leveraged Commentary and Data
• Cash coupons of 12% - 14%
• PIK rates of 2% - 4%
• Closing fees of 2% - 4%
• All-in yields of 16% - 20%
• Warrants are increasingly required; co-investments are becoming
less of an alternative to warrants
• Pre-payment penalties are increasingly stringent and make-whole
provisions are becoming more prevalent
• Mezzanine debt is now being used more frequently to:
– Support LBO transactions due to reduced levels of senior
debt
– De-leverage companies that have excess senior debt
– Perform dividend recapitalizations to replace failed M&A sale
processes
16
Leverage and pricing have tightened over the past three years
Mezzanine Financing – A Changing Landscape
Overview of Transaction Terms (2007 – 2009)
Source: PNC Mezzanine Capital 2009 Mezzanine Market Survey
84.6%86.2%77.3%% of Transactions with Warrants or Equity Buy-In
19.6%18.9%18.0%Average IRR
1.9%2.5%4.5%Five-Year Treasury
17.7%16.4%13.5%Average Spread
3.0%2.4%2.5%Average PIK
% of Transactions with Warrants
Average Equity Ownership
Average Leverage (through Mezzanine)
Average Maturity
Average Fee
Average Cash Coupon
Category 200920082007
55.2%43.6%37.5%
10.1%9.0%7.2%
3.6x3.5x4.0x
5.8 years6.1 years6.2 years
2.3%2.3%1.9%
12.3%12.1%11.8%
84.6%86.2%77.3%% of Transactions with Warrants or Equity Buy-In
19.6%18.9%18.0%Average IRR
1.9%2.5%4.5%Five-Year Treasury
17.7%16.4%13.5%Average Spread
3.0%2.4%2.5%Average PIK
% of Transactions with Warrants
Average Equity Ownership
Average Leverage (through Mezzanine)
Average Maturity
Average Fee
Average Cash Coupon
Category 200920082007
55.2%43.6%37.5%
10.1%9.0%7.2%
3.6x3.5x4.0x
5.8 years6.1 years6.2 years
2.3%2.3%1.9%
12.3%12.1%11.8%
17
The global credit crunch has even impacted private equity groups
Private Equity Funds – Tightened Liquidity
Market Dynamics
Source: Dow Jones Private Equity Analyst
Fund Sizes through April, 2008 and 2009U.S.-Based Fundraising by Quarter
Source: Reuters’ Buyouts
$16.4
$2.6 $2.6$2.6 $1.1
$22.3
$0.8$1.4
$6.2
$56.2
$0
$10
$20
$30
$40
$50
$60
(Dolla
rs in
Billio
ns)
Buyouts/Corporate Finance Venture CapitalFund of Funds MezzanineOther Private Equity
$0
$30
$60
$90
$120
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
(Dol
lars
in B
illion
s)
Q1 Q2 Q3 Q4
• After years of robust fund raising, private equity groups are finding LPs reluctant to commit additional capital to the sector; as a result, private
equity groups are having trouble raising new funds
• Private equity groups are also encountering issues in deploying capital:
– The “denominator” effect is causing some limited partners to back away from funding their original commitments – an unprecedented event
– Many groups have found that difficulty in finding leverage makes traditional investing problematic
– A trend has developed towards more creative investing that offsets leverage issues; an example of this is minority investments
18
7.5x7.1x 6.9x
5.9x6.7x 7.0x
8.5x 8.3x
9.3x
8.1x
7.2x
.0x
3.0x
6.0x
9.0x
12.0x
Senior Debt/EBITDA Mezzanine/EBITDA Equity/EBITDA Others
• Overall M&A activity has slowed significantly
• Equity as a percentage of total capitalization is at an all time high
• Financial buyers are having to commit higher levels of equity with a
view of refinancing when credit markets recover
• The following have become useful methods of bridging the financing
gap:
– Seller notes
– Earn outs
– Purchasing less than 100% of the company
– Minority equity investments
LBO Middle Market ActivityCurrent conditions in the leveraged loan market are influencing M&A activity
Source: Factset Mergerstat; Note: Transaction Values between $10 million and $250 million
Note: Data on Purchase Price and Equity Contribution is not available for 1Q09 due to lack of market activity
Average Equity Contribution by Sponsors of LBO Loans
Market Dynamics
Source: Standard & Poor’s Leveraged Commentary and DataNote: Data on Purchase Price and Equity Contribution is not available for 1Q09 due to lack of market activity
Average Purchase Price and Equity Contribution (Issuers with EBITDA of Less Than $50 million)
20%
25%
30%
35%
40%
45%
19
Leveraged Loan Markets - ConclusionCurrent and forthcoming market conditions call for specific keys to complete a financing
Predictions and Key Take Aways
• Overview of financing sources for 2Q – 4Q 2009
– An increased dependence on asset-based
loans
– Minimal near-term return of cash flow
lending
– The potential return of second lien loans
(resembling more classic Second Liens)
– A continued dependence upon mezzanine
financing
• A surge in amendment activity as covenants
begin to tighten in later years
• A decrease in recoveries
• Private equity groups may start getting impatient
sitting on the sidelines
• Sellers may have to adjust to a new reality
Predictions for Market Dynamics in 2Q – 4Q of 2009
• Need to conduct broad process of contacting
financing sources
• Must have relationship with an experienced deal
champion within the lending organization to
ensure reliable and timely feedback on the
transaction
• Propose an appropriate capital structure that
meets market expectations
– In today’s market this means maximizing
ABL and subordinated debt financing
sources
• Expect longer, more time-consuming process
with increased due diligence
Keys to a Successful Financing