Senior Secured Debt

In most cases where a significant degree of balance sheet leverage will be required, senior debt provided by either banks or commercial finance companies will be "asset-based" debt secured by the tangible assets of CAA's borrower-client. Working capital revolving credit lines normally are structured as "evergreen" financing facilities that have no required principal amortization and where total loan availability rises or falls in relation to the borrower's "eligible" accounts receivable or inventory included in the asset "borrowing base." Term loans are normally secured by production equipment with loan availability based upon a percentage of "orderly liquidation value" (OLV) or "forced" liquidation value (FLV) as determined by independent appraisal. Equipment-based term loans normally have repayment terms of 5-7 years, however up to 10-year amortization schedules are available under certain SBA lending programs. Plant mortgages normally will have principal repayment / amortization schedules of 15-25 years, but are often structured on a 3-5 year note with a "balloon" payment that is assumed to be refinanced with the same lender if the borrower's financial performance and credit capacity have not deteriorated. CAA, which has relationships with many commercial banks and commercial finance companies, normally will arrange senior debt in aggregate amounts of greater than $750,000 (and, ideally, in aggregate amounts of $1.0 million or more).

Asset "Over-Advance" / "Cash Flow" Loans

Some banks and commercial finance companies will make "cash flow" loans to borrowers who either have a history of cash flow generation or post-transaction pro-forma cash flow sufficient to amortize a cash flow loan within 12-30 months while still being able to meet all other scheduled debt service (i.e., both principal and interest). Cash flow loans from the senior secured lender are normally cross- collateralized with the senior secured revolving credit lines and equipment / term loan facilities. Importantly, while more expensive than senior secured debt with conventional loan-to-collateral advance rates, cash flow loans are significantly less costly than subordinated debt / mezzanine financing.

Mezzanine / Private Equity Financing

Borrowers who either have a track record or convincing story that their annual Pro-Forma EBITDA* is / will be greater than $1.0 million (but, ideally, greater than $1.5 million) will normally have at least some access to private equity funds that can provide either "mezzanine financing" or straight equity financing. CAA has relationships with many private equity funds/groups that provide either mezzanine or equity financing. CAA normally will arrange mezzanine / private equity financing in amounts greater than $2.0 million.

All the types of financing described above can be used either in acquisition or corporate financial restructuring transactions. In corporate financial restructuring transactions, in addition to arranging new financing, CAA also can assist its borrower-clients to restructure their trade creditor debt so that all the borrower's debt service can be comfortably serviced by the borrower's reasonably projected pro-forma operating cash flow.

As with CAA's fee structures for M&A transactions, CAA's fees for arranging financings are very competitive and are individually negotiated with each borrower-client. Financing fees are determined by the size and structure of the financing(s), the anticipated degree of difficulty (or ease) in arranging the financing(s), timing constraints, and other transaction-specific issues/requirements.