Alternative
Thinking
Overview
Fraser Mackenzie Private Credit is currently making 2 to 5 year term loans from Navigate Private Yield Fund LP III in the form of mezzanine debt (including subordinated debt) to profitable, privately-owned and small-cap public companies. The Fund has a Canada-wide mandate but will also look at companies based in the United States on an opportunistic basis. The Fund will look at opportunities in almost any industry. The typical profile of FMPC’s portfolio companies are those with strong stable cashflows, and which may also have an asset base that is under-appreciated by its bank lender, such as a subscription base of recurring revenues, vacant land, or other assets not fully leveraged by a bank.
While the Fund sometimes is the only lender to a company, it more often partners with a Canadian bank or credit union where together we can provide a company with a full debt solution. In such instances FMPC provides a layer of term debt that takes a 2nd secured charge, subordinated to the bank’s position, thereby enhancing the borrower’s ability to meet its financial covenants with its bank.
Fraser Mackenzie Private Credit’s financings are typically event-driven, initiated when a shareholder group identifies a value enhancement opportunity but cannot secure senior bank debt for the full funding requirement. The most common reasons for FMPC funding include:
- acquisition financing, or financing of some other growth initiative
- buying out a retiring/disinterested shareholder or business partner
- supporting receivables collection cycles beyond bank’s usual 90 day maximum for inclusion in margining formula
- supporting capital needs outside of senior lender covenants
- lending against under-appreciated assets
- re-capitalization of the business’ balance sheet
“We think like business owners because we are!”
FMPC’s founder has a background that includes not only mezzanine debt lending, but also private equity and founding/co-founding five businesses. This enables FMPC to understand opportunities from the owner’s perspective and to recognize value where many other lenders may not. While FMPC has considerable flexibility with its loan structures, most typically these would entail 5 year term loans with a current interest rate in the teens. In addition, there would be a “sweetener” such as share purchase warrants in the business, that provides upside participation in the growth of the business that the loan has facilitated.
INVESTMENT CRITERIA
Profitability
Minimum trailing EBITDA of $1mm
Industry
Most industries, excluding commodities exploration / extraction, crypto and cannabis
Target Cheque Size
Up to $10mm with a sweet spot of $2 to $6mm per loan
Geography
Canada-wide with ability to lend to US companies with meaningful connection to Canada
Other
Stable or growing cashflows
For more information or to talk about a specific opportunity, please reach out at any time! We would be happy to hear from you! Contact Us.
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