FMMC Private Yield Fund provides subordinated debt (also called mezzanine debt) term loans to profitable, privately-owned and small-cap public businesses, primarily in Canada and the northeastern United States. We love businesses across almost all industry types so long as they have strong stable cashflows and possibly excess realizable value on their asset base beyond existing debt facilities. We are not a distressed debt or venture/early stage debt fund. We typically get involved when a shareholder group sees an opportunity to enhance the value of their shareholdings, but for any of a variety of reasons traditional senior bank debt is not feasible for funding the full amount (or possibly any) of the opportunity. Typical situations would include:
- acquisition financing, or financing of some other growth initiative
- buying out a retiring/disinterested shareholder or business partner
- supporting a management buy-out or a spin-out from a larger entity
- re-capitalization of the business’ balance sheet
We think like business owners because we are! Spending half of our time making equity investments in owner-operated businesses through our FMMC Buyout Fund allows us to understand opportunities from the owner’s perspective and to see and appreciate value where some other lenders may not. We have the flexibility to structure our loan in a variety of ways, but typically these would be 5 year loans carrying a cash coupon in the teens, plus some sort of “sweetener”, such as share purchase warrants in the business, deferred interest or bonus payment that lets us participate in some way in the growth of the business that our loan has facilitated.