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LIBOR Loan Case Study #171 |
 |
August 24, 2009
Problem:
Well-established boutique brick-and-mortar business seeks to bring
their 3 locations into the 21st century to compete with e-business equipped
rivals. The nature of their technology upgrades and infrastructure
expenditures necessitate a LARGE business development loan, cumbersome at
best, and reminiscent of black holes at their worst. Future cash-flow based
lending relies on a three legged stool approach - and cash-flow TOMORROW does
not pay for outlay today, not from lenders that won't take the Lion's Share.
The Due-Dil:
I spoke with my network of boutique and niche lenders,
investors, and funds - most had seen this deal. In fact, I was given a debt
finance term sheet within an hour of submittal, as this particular fund had seen the
deal NO LESS THAN 5 TIMES!
The Follow Up:
Upon speaking with the CFO of said corporation, I learned
that they had no less than four concurrent deals all submitted at the same
time. One was hard money, two were sale/leaseback situations, and one was a JV
which would take <90% until payback. OUCH!
The Offer:
$12 MM Private Banking Credit Facility on an estimated value of
$24 MM. 5 year term, 360 month amortization, at 30-day LIBOR (.27) + 225 bps
over index (effective rate of 2.52%!). Daily rate change along with index.
Collateral to be first lien mortgage on land and improvements at flagship
location. 3% fee to lender with .5% commission to yours truly, $1800.00
nonrefundable processing deposit, $12K max in refundable-at-close deposit
towards third-party fees. This is as good as it gets!
The Reaction:
Nil. Nada. Zilch. They are still shopping. They will remain
shopping. There are some folks you can't please even if you bring them a
great deal. The moral of the story is that "you can bring a horse to water,
but you can't make him drink" (especially when he likes to drink seawater).
Jack Williams spends his time solving problems, facilitating new and
expanding relationships, and "whale watching" (per Paul Wylie). The
whales are closer every day. Jack can be contacted in care of gotrates.net.