Junior capital is frequently the last piece of the financing puzzle, making it the most constrained—not only by the terms of senior debt and equity arrangements—but also by time.
We are accustomed to the pressures. We guide clients through the process and meet tight deadlines, as we balance the needs of the people who are raising capital with the expectations of the people who are investing in the enterprise.
JUNIOR CAPITAL SOLUTIONS DRAW ON RESOURCES FROM ACROSS VENABLE
What we do:
Venable’s junior capital attorneys represent lenders, investors and issuers in structuring and closing debt and equity transactions. The lenders are most often mezzanine funds and private equity groups, including SBICs. The transactions are both secured and unsecured, with equity (including warrants) and without.
An essential part of our work is negotiating subordination and intercreditor agreements with senior lenders and advising lenders on post-investment issues. We collaborate with Venable’s Bankruptcy and Creditors’ Rights attorneys in providing advice on restructuring, when appropriate.
On a national scale, we work with major banks and funds on loans of tens of millions of dollars, as well as with regional funds that serve the more modest needs of smaller businesses. Our focus and experience enable us to provide sound, practical advice to leading investors around the country and to structure transactions quickly and efficiently to protect the best interests of clients.
We’ve assembled a mezzanine finance “A team” by:
- immersing them in hundreds of transactions with lenders and borrowers with diverse requirements and preferences—resulting in a storehouse of industry knowledge—so that juggling risk assessments and pricing variations becomes automatic;
- recruiting attorneys who are responsive by nature—ready to work around the clock to get complex deals closed on time;
- developing the agility to anticipate rapid changes in deal terms and take them in stride;
- building the depth and breadth needed to handle many deals at once;
- including team members focused on tax, regulatory and bankruptcy issues—so that lenders are protected throughout the life of their deals; and
- reinforcing experience by becoming a constant force at industry conferences and professional meetings—resulting in us being looked to for thought leadership.
We go above and beyond to solve difficult problems—like these:
- A Mid-Atlantic based SBIC was leading a group of three investment funds investors who were making a $15 million mezzanine investment in a management buyout. The acquisition vehicle was a limited liability company. The operating agreement provided for mandatory tax distribution from which the investors were not to benefit. The warrant provided for adjustment in the event of any other distributions. The borrower’s counsel struggled with how to reconcile the operating agreement and the adjustment mechanism of the warrant.
Solution: Venable’s tax counsel revised the operating agreement to provide for appropriate mandatory tax distributions that were not included in the adjustments called for by the warrant. Particular attention was paid to the tax distribution requirements of owners who lived in various states.
- A major bank needed a vehicle through which to properly price risk in an era of tightening credit, by developing a subordinated instrument, and wanted to develop distribution channels for that product.
Solution: We helped the bank develop a second-lien product and describe the product to its employees. The product is up and running and has evolved into a traditional mezzanine facility.
- A real estate investment company (REIT) saw an opportunity to invest in a distressed office building through subordinated debt but had never made such a loan solution.
Solution: Our team prepared the proper documentation, secured by equity pledges, to complete the transaction with the confidence of the REIT’s board and senior management.
- Sub-debt firms providing capital at the bottom of the middle market must be able to document complex deals simply and efficiently.
Solution: We developed form documents written in language that less sophisticated borrowers understand. The result: Deals move faster, with fewer questions and less time spent in negotiation.
- A sub-debt firm was invited to sponsor a management-led buyout of a distressed asset. The challenge: The deal had to close in less than a week and was more than 2,000 miles away from the sponsoring fund.
Solution: We assembled a team of Venable attorneys from coast to coast. Within 12 hours, a Venable attorney was in the target’s office performing due diligence. The deal closed in less than five business days.
Our mezzanine finance attorneys focus on delivering pragmatic solutions that enable deals to close on time. We’ve facilitated the completion of hundreds of transactions with creative, problem-solving skills that have earned the praise of lenders, borrowers and investors across the country.