May 2019 – You can learn to be a good borrower

Lending situations are simultaneously transactional and relational in their orientation. Most of us are borrowers right now and many of us are lenders. Whether you realize it or not, you have a relationship with your lender, with all of your lenders. It may be a relationship that is mostly transactional in nature, as is the case with most credit cards, but there is still a relationship there. With commercial lending situations, the pendulum swings much more to the relationship end of the spectrum. And that relationship, like any relationship, is between human beings. As we like to often say – banks/lenders don’t make credit decisions, people make credit decisions. Therefore, having a good relationship with your lender is essential. To reiterate, all borrowers and lenders have a relationship, whether they believe it or not

May 2019 - Market Research and Commentary

This month’s research analyzes the credit conditions facing the consumer and the conditions facing the commercial space. Following a yield-curve inversion in Quarter 1 , the 10-year yield has regained yield and its yield is now greater than the 3-month. This inversion is having ramifications for both the consumer and the business as our U.S. and global economy activity remains tightly correlated to the availability and price of credit. Some areas of credit such as credit cards have tightened substantially while on the business side, leverage has remained relatively stable.

April 2019 - Chart of the Month

CHART OF THE MONTH

The black arrows display the increasing 3-Month Treasury Yield compared to the decreasing or flat 10-Year Treasury Yield. The red arrow show the general trend of quarterly GDP growth following a flattening or inverted yield curve. In all of the last three recessions there was a notable time lag between the date the yield curve inverted and when GDP growth was negative for consecutive quarters.

The black arrows display the increasing 3-Month Treasury Yield compared to the decreasing or flat 10-Year Treasury Yield. The red arrow show the general trend of quarterly GDP growth following a flattening or inverted yield curve. In all of the last three recessions there was a notable time lag between the date the yield curve inverted and when GDP growth was negative for consecutive quarters.

April 2019 - LevFin Lower-Middle Market Transaction

Recent Lower-Middle-Market Transactions as first reported by LevFin Insights

Recent Lower-Middle-Market Transactions as first reported by LevFin Insights

Lower Middle Market Direct Lending: Breakaway Capital provides $14M refi credit facility to People’s Care

Breakaway Capital on March 1 provided People’s Care Holdings with a $14 million senior credit facility to refinancing existing debt.

People’s Care provides specialized care services to adults and children with intellectual and developmental disabilities, as well as to senior and individuals with other care needs. Crystal Financial in April 2018 announced it had closed on a $15 million senior term loan to consolidate People’s Care’s existing debt facilities and to finance the expansion of the Chino Hills, Calif.-based company’s network of group residential homes and community day centers.

Breakaway Capital has about $150 million of committed capital under management and will provide loans of $5 million to $20 million for companies with annual revenue between $10 million and $75 million and EBITDA between $2 million and $7 million. – Thomas Dunford

thomas.dunford@levfininsights.com

212.205.8552

Lower Middle Market: Texas Capital Bank leads senior credit facility for Flex Leasing Power and Service

Flex Leasing Power and Service today said it has closed on a senior credit facility led by Texas Capital Bank to support the continued growth of its fleet of Flex Turbine brand small gas turbine generators through 2019 and beyond.

Flex leases natural-gas-powered turbines to participants in the oil and gas industry. The Denver-based company plans to increase the fleet of Flex Turbines to more than 50 megawatts of installed capacity by the end of the year. The turbines are manufactured and delivered to Flex Leasing by sister company FlexEnergy, an original equipment manufacturer.

Intervale Capital in 2014 acquired Flex Leasing and FlexEnergy, combining the former with Thigpen Energy and Recapture Solutions to form TRF Energy Solutions. Just nine months after that merger, Thigpen spun off from the TRF platform. Intervale lists FlexEnergy as a current portfolio investment and Thigpen as a past investment.

Intervale typically makes buyout investments for platform companies with $8 million to $50 million in trailing-12-month EBITDA.

Texas Capital Bank, a subsidiary of Texas Capital Bancshares (Nasdaq: TCBI), offers term loans and lines of credit, equipment finance and leasing, sponsor finance, SBA loans, asset-based lending, loan syndication and insurance premiums financing to middle-market companies.

Gordian Group acted as sole financial advisor to Flex Leasing Power and Service. – Thomas Dunford

thomas.dunford@levfininsights.com

212.205.8552

Lower Middle Market: Madison Capital provides financing for New Heritage’s investment in Rhythmlink

Madison Capital Funding was sole lender on financing last month to support New Heritage Capital in its recapitalization of Rhythmlink International. Madison is also administrative agent on the financing.

Rhythmlink is a designer and manufacturer of disposable neurodiagnostic devices and consumables. New Heritage completed its investment in the Columbia, S.C.-based company on Feb. 19.

New Heritage typically invests $15 million to $40 million of equity in business services, healthcare and manufacturing companies with annual EBITDA of $4 million to $20 million.

New Heritage’s strategy leaves operating control in the hands of reinvesting founders. Co-founders Shawn Regan and Michael O’Leary are remaining on board as CEO and COO, respectively. – Thomas Dunford

thomas.dunford@levfininsights.com

212.205.8552

Lower Middle Market: Monroe finances Southfield’s investment in Protos Security

Monroe Capital provided debt financing to support Southfield Capital in its investment in Protos Security.

Protos provides end-to-end security-guard management services throughout the U.S., Canada and Puerto Rico through a proprietary technology system and vendor network. The Daleville, Va.-based company enables clients to outsource the administrative tasks of onboarding, managing and tracking security guards.

Southfield targets investments in companies with $4 million to $12 million in annual EBITDA.

Monroe focuses on providing senior, unitranche, junior secured, club and syndicated, and subordinated debt financing and minority equity investments to U.S. and Canadian companies with at least $3 million in EBITDA.

Pepper Hamilton provided counsel to Southfield Capital. – Thomas Dunford

thomas.dunford@levfininsights.com

212.205.8552