Increase Investment Capacity, Fund Commitments, Refinance Older Facilities & Rebalance Portfolios
By enabling clients to borrow against their illiquid private stock and other private assets, NYPF’s credit facilities offer an alternative to traditional capital sources. NYPF’s facilities can complement an overall strategy that includes raising outside equity (whether from private equity or venture capital), securing subordinated debt at the operating company level, or selling an asset. NYPF’s loan facilities do not compete with senior debt at the operating company level.
Following is a description of some actual transactions.
Independent Sponsor Financing
The Scenario: A successful entrepreneur who had established a single-family office acting as an independent private equity sponsor sought to borrow against a broad range of illiquid assets including shares in private companies and LP interests in private equity and venture capital funds. The use of proceeds was to meet periodic capital calls from passive investments as well as to provide substantial capital to inject in two start-ups created by him (a private equity fund with a unique specialization, and an on-line financial services venture) thereby acting as a NAV loan against the borrower’s existing portfolio.
The Deal: NYPF structured an initial loan of $5 million. Continuing growth in the value of his illiquid portfolio, coupled with certain limited liquidity events and substantial increases in the value and opportunity set for his two start-ups, caused him to seek increased funding from NYPF twice since the inception of the loan.
The Result: The facility grew to more than 3X the initial amount and set the stage for a major upcoming liquidity event.
Partner Buyout
The Scenario: The owner of a specialty food company had taken an investment from a family friend to fund the development of his business. As the business matured and the investor reached a certain age, both sides saw the wisdom of the owner/operator buying out his passive partner. To fund the partner buy-out, the owner evaluated private equity, corporate mezzanine debt and a structured loan from NYPF.
The Deal: He chose to borrow against his illiquid equity from NYPF because we afforded him 100% control of his company, provided him a competitive cost of capital and maintained the covenant flexibility he desired with respect to his senior lenders at the operating level.
The Result: The business is now generating cash flow sufficient to retire the NYPF structured loan prior to its maturity.
Middle Market Acquisition Financing
The Scenario: An independent waste management owner/operator had recently concluded a recapitalization of his business designed to position it to grow via acquisition with an eye to an eventual sale. His lenders in the recap, a major bank, had imposed covenants that limited distributions to him until the business achieved certain free cash flow thresholds. Although reasonable, these covenants served as a potential constraint on his ability to fund personally several related technology and resource investments.
The Deal: NYPF structured a personal loan against his illiquid equity which provided the medium term flexibility he needed.
The Results: The loan to the owner/operator allowed the company to pursue its acquisition strategy, while the entrepreneur captured the upside of technological innovation – all of which served to improve investment diversification and to increase the pace his of wealth creation.
Growth Capital for Real Estate Developer
The Scenario: Three partners in a middle market real estate development and management company had created substantial value in the holding company that managed their real estate empire. Although individual projects and the company itself were appropriately financed, their equity in the holding company was lying fallow. They engaged with NYPF to borrow against their illiquid personal stakes in the enterprise.
The Deal: We provided a $20 million, five-year structured loan to the partners through a jointly-held, private investment company. These funds were then used to increase the rate at which they took on new projects and the size of their personal investments in individual projects.
The Result: The result was a substantial step-up in their personal wealth creation, a large increase in the performance of their enterprise, and ultimately the sale of a stake in the company to a private equity fund at a significantly enhanced valuation.
